From GST to e-invoicing: How India is setting the global benchmark for digital taxation

India’s transformation from cumbersome paper trails to seamless digital ledgers is not merely a domestic success story, it is becoming a global template for modernizing tax systems. In its 2025 report on Digital Public Infrastructure (DPI), India’s G20 Task Force has complemented innovative digital initiatives like Unified Payments Interface (UPI), Open Network for Digital Commerce (ONDC), Aadhaar, and platforms such as India Stack as scalable and interoperable systems that have revolutionized public services and governance.

Moreover, the Government has also made considerable investment in encouraging entrepreneurs to build businesses using this highly innovative and scalable infrastructure. Not only have these systems driven inclusion and growth, but they have also captured global attention. India now aims to export its DPI model to the world, with a particular focus on empowering countries across the global South.

On similar lines, the trust built by the government’s digital initiatives and India’s digital tax system has propelled organisations towards implementing tech-enabled tax operations in their digital journey.

India made a strong move in 2017 to change its tax regime with the introduction of the Goods and Services Tax (GST). It brought real-time compliance and tighter control.

This shift got a big fillip when the government introduced e-invoicing, driving it down industry segments until it became mandatory for businesses with an annual turnover exceeding Rs 5 crore in August 2023. This requirement was another move from a post-transaction (after-the-fact) compliance model, to an upfront, real-time validation of the invoice.

The bumps beneath the success

Of course, India’s digital taxation journey has not been without friction. Infrastructure gaps in smaller towns, combined with accountants struggling with unfamiliar systems, made the transition far from seamless.

Small businesses, with limited digital exposure, faced significant hurdles, and system fatigue often slowed progress. At the same time, the government was tightening its grip on fraudulent invoicing and inflated input tax credit (ITC) claims.

The sharp increase in fake Input Tax credits from Rs 24,140 crore in FY 2022–23 to Rs 36,374 crore in FY 2023–24 underscored the need for real-time invoice checks and stricter compliance. For many businesses, even grasping ITC reconciliation proved demanding, making the shift to real-time validation both necessary and challenging.

Recognizing these challenges, India has smartly adopted phased rollouts, conducted constant industry consultations, implemented user interface improvements, and extended compliance deadlines.

These actionable strategies addressed the immediate challenges and also built long-term trust and capability within the system. Now, countries across the globe are not just curious about India’s technology success, they’re also seriously studying its tax technology map.

Moreover, the design philosophy, which includes open APIs, interoperability, low-cost scalability, and public-private coordination, is a replicable principle, especially for emerging economies that require efficient revenue systems without incurring expensive infrastructure costs.

Future-ready tax systems

The current phase of India’s tax evolution is marked by technological upgrades. It’s changing how businesses engage with compliance itself. The introduction of Artificial Intelligence (AI), machine learning (ML) and blockchain by India is also creating a heightened standard for compliance.

These technologies are not just going to monitor compliance failures, they are able to make sure that those failures do not occur in the first place. AI analytics will be able to assess data patterns and risks, report any anomalies, and suggest remedial actions before failures occur.

The move toward using blockchain for audit trails and tamper-proof invoicing is a positive step that can strengthen transparency, not only in maintaining records but also in how tax data is monitored and analysed.

With these changes, companies will need more than system updates. They’ll need structured support to transition from manual processes to digital compliance that works at scale. This shift becomes even more critical for exporters operating in multiple tax regimes abroad, especially as cross-border complexities continue to increase.

Businesses that can automate tax determination, manage varying jurisdictional rules, and simplify documentation will find it easier to scale internationally without getting caught in compliance tasks. By aligning early with the right partners and proven practices, businesses can position themselves as proactive participants in regulatory compliance.

The world is watching

India’s digital tax journey stands as a strong example of how technology, combined with pragmatic policy, can reshape tax compliance. This is the case for growth across borders and within borders.

Initiatives like the GST linked e-invoicing, real-time validation of invoices and actions towards global reporting, are helping to set global trends for India. This transition reflects wider change with tax evolving from a reactive and retrospectively applied process to a proactive, system-led function. As demonstrated in the OECD's 2025 report, the 54 member countries of the Forum on Tax Administration have already incorporated AI, big data and digital identity systems into their tax platforms, which is allowing for more effective oversight and risk-based audits.

As countries move towards structured invoicing, linking tax data with customs, and applying technology for audit trails via data analysis, businesses must prepare for a world in which compliance is real-time, automated, and provides evidence as part of every transaction. The message is simple: businesses that pay attention now and build compliance systems that are flexible, globally compliant, and future-proof not only meet global compliance obligations but also position themselves to gain a competitive advantage in a digitally regulated world.

Anil Paranjape, General Manager of India Operations at Avalara