New Delhi : Deloitte India Tax President Gokul Chaudhri calls for AI models to predict litigation success and a US-style system to report top dispute areas to Parliament to unclog India’s tax system.
The sticky issue of tax disputes in India would need technological solutions like using artificial intelligence (AI) for the tax department to identify cases worth litigating, and other mitigation strategies such as reporting prominent areas of discord to Parliament, Deloitte India Tax President Gokul Chaudhri said.
Over the last decade, the government has pulled some of the right levers to improve the tax system—such as reducing tax rates and removing most exemptions—but tax disputes continue to mount.
Chaudhri noted that the United States has a mechanism where the tax department reports the top 100 issues on which the department and the taxpayer are at loggerheads to Congress every year. “By simply pushing the tax department to state the key areas in which litigation is happening, you could make a lot of difference. “Parliament’s oversight of the disputes will ensure public scrutiny and help improve transparency,” he told FE. He cited the strength of GST Network, the IT backbone of the indirect tax, and pervasive UPI transactions as examples of how technology has eased tax administration.
Chaudhri said the government has largely delivered on the tax reform roadmap outlined by late finance minister Arun Jaitley in 2015, which envisaged lower tax rates, fewer exemptions and a broader tax base. While the implementation was delayed by the pandemic, the reforms have substantially been completed. Alongside this, the rollout of GST and the GST Network has provided India with a strong digital backbone for tax administration, giving the government greater confidence in managing taxation in a large and fast-growing economy.
However, he said, tax litigation remains one of the weakest links in the system, with a substantial amount of revenue locked in disputes. He argued that technology, particularly AI, could help reduce unnecessary litigation and speed up tax recovery.
Citing examples from Europe, particularly the Netherlands, Chaudhri said AI models have been developed that analyse past court rulings and tax jurisprudence to assess the probability of success in tax litigation. Such systems can evaluate a tax order and estimate whether the government has a high or low chance of succeeding in an appeal. Rather than pursuing every case, tax authorities should focus on disputes where they have a strong likelihood of success, he said, adding that indiscriminate litigation only clogs the judicial system.
“If out of 400,000 pending cases the government finds only around 40,000 where it has a strong chance of success, there should be a mechanism to weed out the remaining cases,” he said, noting that countries such as the UK also follow a filtration process to determine which disputes are worth pursuing.
He cited Australia’s experience, where the tax office publicly identifies transactions that it considers high risk and likely to attract scrutiny. Such guidance has encouraged taxpayers to avoid aggressive tax positions, making taxation more of a behavioural discipline than merely a compliance exercise.
Looking ahead, Chaudhri said India’s tax architecture needs institutional reforms to support its ambition of becoming a $10 trillion economy. As new business models emerge in areas such as cloud computing and data centres, the country will require mechanisms such as an emerging issues task force and an Office of Tax Simplification to ensure the tax framework evolves with the economy.
He also suggested administrative reforms, including making stranded GST input tax credits refundable or tradable instead of allowing them to remain idle on company balance sheets. For startups, he advocated a lighter-touch compliance framework rather than tax holidays, arguing that early-stage firms need simpler compliance rather than tax incentives.
For the country’s 17 million MSMEs, Chaudhri proposed a unified digital platform that would enable businesses to complete both direct and indirect tax compliances online at a fraction of current compliance costs. Deloitte, he said, is building a platform integrating key tax functions that it hopes to make available to MSMEs later this year.
