Beyond returns and reconciliation, the new phase of GST compliance in India
When GST was introduced in India in 2017, its compliance was complex and all about bulky files, manual reconciliations, numerous returns, non-standard processes, lack of automation, no clear visibility on business transactions, scattered ITC compliance, and endless back and forth between businesses and the GST department.
With over eight years now, the government has evolved the compliance requirements to streamline tax administration, ensure transparency, and avoid tax leakage. Now, it has become data-driven and near real-time. Let’s have highlights on some of the major evolutions the GST department made in facilitating compliance.
Introduction of E-Way bill –
The E-Way bill is an electronic document, introduced in GST from 1st April 2018, for the movement of goods valued >/= Rs 50,000. It ensures transparent and hassle-free documentation and tracking of the movements of goods from the place of origin to the destination. Now, with the introduction of E-Invoicing, Part A of EWB gets auto-populated based on the details furnished while generating E-Invoicing, ensuring reduced data-filling errors.
ITC Matching
ITC matching requires verification of the credit availed by the recipient with the supplier’s supply data reported in GSTR-1, which is reflected in GSTR 2A/2B of the recipient. Provisional ITC initially allowed up to 20% but was eventually reduced to 10-5% and scrapped by October 2022, meaning only ITC to the extent available in GSTR-2B was allowed to be availed.
Now with the introduction of IMS, only invoices accepted/deemed accepted with flow to GSTR-2B for availment, restricting ITC availment to the extent of action taken by the recipient in IMS.
E-Invoicing
E-Invoicing became mandatory starting from 1st October 2020 for B2B transactions for entities having Annual Aggregate Turnover (AATO) >= 500 Crores.
Right now, E-Invoicing is applicable to businesses with an AATO of more than 5 crores.
Further, from April 1, 2025 onwards, an invoice is mandatorily required to be reported to the Invoice Registration Portal (IRP) within 30 days from the invoice date, for businesses with an AATO of 10 crores and more, enabling transparency and auto-population of returns and EWB.
Introduction of IMS
The Invoice Management System became operational from 1st October 2024, allowing recipients to verify, accept, reject, or keep invoices pending. Only accepted/deemed accepted invoices flow to GSTR-2B, ensuring accurate ITC claim.
Mandatory ISD implementation
From April 1, 2025, an Input Service Distributor registration is mandatory for businesses to distribute ITC for common third-party services used by multiple units for which an invoice is issued in the name of the HO, standardizing reporting and ITC allocation.
Hard-locking of GSTR-3B
From the July 2025 tax period, GSTR-3B outward supplies, auto-populated from GSTR-1/1A/IFF, are non-editable. Errors must be corrected via GSTR-1A before GSTR-3B filing. The ITC side may also be locked later, ensuring verified, reconciled data reporting.
While this is an overview of the GST amendments and mandates implemented over the years to ensure transparency and tax compliance automation, there are many other mandates already implemented or expected soon.
Is GST Compliance possible without automation?
Under GST compliance, business has to handle reconciliations, e-invoicing, manual data uploads, EWB generation, IMS actions, return filing, and reporting. Relying on traditional or manual methods can make this task error-prone, inefficient, and invite penalties. Therefore, it is important to integrate GST technology.
Before exploring various GST technology or compliance tools, we should know how automated GST compliance will benefit businesses over the traditional methods.
Advantages of Automated GST compliance over traditional methods.
Reduced Efforts: Auto-sync and population of data, automated reconciliation, and verification reduce manual workload up to 85-90%.
Enhanced accuracy: Automated GST compliance provides accuracy up to 95% due to reduced manual intervention, system validations, AI-based reconciliations, error-detection, etc
Time Spent: Ensures faster processing and compliance, saving up to 85-90% of time spent on switching Excel sheets and documents, and reducing TAT from days to hours.
Scalability: Handles 10x transaction growth without additional resources and supports business expansion, accommodating all sizes of businesses without any hurdles.
Cost-effectiveness: Initial investments are costly, but ensure up to 60-70% savings from operational costs, Interests, and penalties in the future.
Real-time validations: Built-in checks and validations ensure instant checks on data, taxes, and compliance during processing and enable immediate error correction, better ITC, ensuring 30% improvement, and real-time insights.
Tools Driving GST Compliance Automation
ASP/GSP ecosystem
GSPs are authorized by the GSTN to facilitate connectivity to the IPR portal for e-invoicing. ASPs provide software solutions for end-to-end GST compliance. The ASP/GSP offers a user-friendly and unified GST compliance platform integrated with ERP and GST portals for end-to-end tax compliance automation. A few features of the ASP/GSP solution are:
- API-based integration for real-time data transfer and validation
- Manages voluminous data for GST compliance and return filing
- AI-based reconciliations and optimum ITC utilization
- Intelligent dashboards and insights for decision making
- Risk identification with predictive analytics.
- Automation of repetitive tasks based on set algorithms.
IMS solution
While IMS is operational but not mandatory, it is still vital for businesses to start exploring an ideal IMS solution to stay ahead of compliance mandates. Here are a few features to look for in your IMS compliance
- Build in real-time reconciliation of the purchase register with IMS data.
- Default bulk actions set based on buckets such as matched, mismatched, matched by tolerance, etc.
- No 500 records viewing limits.
- Automated alert to vendors on invoice rejection or discrepancies
- Auto-sync of IMS with ERP and GST compliance solution
- Dashboards for reconciliations and vendor filing status.
ISD solution
Integration of an ISD solution is a must for companies with voluminous transactions and multiple business locations. Here are vital features to consider in an ISD solution
- Inward invoice verification for error-check and discrepancies
- ISD credit allocation based on turnover ratio
- ISD invoice issuance for ITC distribution
- Automated reconciliation with GSTR-6A
- Auto-populate GSTR-6 and prepare data for return filing
- Dashboards for ITC availed and distribution reports
E-invoicing tool
An e-invoicing solution is crucial in today’s time, where there is a global move towards mandating e-invoicing, particularly for businesses operating in various jurisdictions. Ensure your e-invoicing service provider serves across multiple countries to avoid juggling across various service providers and different e-invoicing tools.
- Service provider accredited across multiple countries.
- Seamless integration with ERP, GST portal, and GST compliance solutions
- Automated upload of invoices to IRP and get IRN responses in bulk.
- Print and download individual and bulk invoices with QR Code and IRP’s Acknowledgement in PDF.
- Auto-sync original invoices with invoices pushed to IRP/GSTN and provide a Reconciliation Report.
- Store invoice for over 48 hours as per compliance requirements.
- Assistance with cancelling e-invoices and e-way bills.
E-way bill generation tool
An e-way bill seems just a piece of documentation for movements of goods, but in reality, it is more than that when mismatches occur between the e-way bill, e-invoices, and GSTR 1 or moving with an expired or invalid EWB, resulting in confiscation of goods and penalties. A tool for compliance with EWB should include:
- Creates e-way bills instantly using e-invoice data and ensures alignment with delivery challans.
- Auto-calculates transport distances based on the place of destination to ensure EWB validity.
- Ensures compliance with GST compliance instant checks and verification.
- Ensure transfer within units with proper taxability based on intra-state or inter-state.
- Shares e-way bills via email or messaging with transporters.
- Ensure proper audit logs for EWB, delivery challan, e-invoice, goods return, etc, for GST compliance.
Return filing
Return filing at this point should be streamlined and efficient, with over 8 years of compliance. However, there are many businesses that still face challenges in filing returns and meeting deadlines.
To avoid such situations, businesses must ensure a suitable return filing tool as follows:
- Auto-population and assistance in filing GSTR-1, GSTR-3B, GSTR-9, etc., using e-invoice and IMS data.
- Identifies and flags errors in return data before submission.
- Supports filing for multiple GSTINs at the PAN level.
- Alerts for return filing deadlines and ensure penalties are avoided
- Maintain records, supporting documents, and filed returns for audit-readiness
- Each returns filed are aligned with GST law requirements.
- Ensure line-item-wise reporting based on HSN code in table 12 of GSTR-1.
- Ensure cross-verification of values in Table 12 with other tables.
3/6 way reconciliation tool
Reconciliation plays a key role in GST compliance. If a business fails to reconcile various data, it may face the risk of ITC loss, inaccurate tax payment, and other compliance requirements, inviting penalties and notices. A look into important features:
- Fetches data from ERP, GST portals, e-invoices, IMS, etc, to ensure thorough reconciliations.
- The 3/6 way reconciliation reconciles the Sales register, GSTR-1, e-invoice, e-way bill, GSTR-3B, and for inward supply, it reconciles the purchase register, e-invoice received, PO, IMS data, GSTR-2B/2A, and GSTR-3B for end-to-end data match across inward and outward supply.
- AI-based automated reconciliation reduces manual errors and is less time-consuming.
- The reconciliation is based on predefined and set logics which provide matched, mismatched, matched by tolerance, entries only in ERP, etc, requiring human intervention for only mismatched or unreconciled data.
- The mismatched data are flagged and notified for human intervention.
- Generates detailed reconciliation reports for GST audit.
GST Litigation Management tool
Even with the integration of GST technology across business operations and compliance, GST notices are still imposed on businesses, disturbing their regular operations and juggling between document collection and meeting reply deadlines. An effective Litigation Management Solution is vital for businesses piled with notices and reply deadlines for:
- Automated GST retrieval and storage
- Intelligent Document Processing for Notice Parsing.
- Automated task assignment and workflow management based on set criteria.
- Real-time notification of notice deadline alerts
- Categorization of notices based on financial risk and type of notice
- Maintenance of records and case history for audit and financial reporting
- Centralized repository and dashboard with case view.
All these tools ensure specific GST compliance; however, other additional common features any tool should have are cloud options, security measures and certifications, various integration methods, supporting all types of ERPs, 24*7 support, and expert advice.
Conclusion
Tax compliance automation is not an option, irrespective of business size, but an important business requirement to ensure compliance. However, what’s more important is to have a single source of truth, i.e., one solution and unified platform for all your GST compliance needs to avoid struggling with different user interfaces and requirements of various tools and service providers, and focus on strategic goals.
