Prudent Use of AI in GST

WHEN AI SPEEDS UP, WISDOM MUST STEP UP

Artificial Intelligence-often called A.I.-has had an incredible journey to become the amazing technology it is today. Its groundwork was laid way back in 1956, when some visionary computer scientists at the Dartmouth Conference suggested that machines might one day be able to "think." For many years, A.I. was mainly an academic pursuit-a dream for researchers but not yet something everyday people could access. It was not until the breakthrough of deep learning in 2012, when computers began surpassing humans in tasks like image recognition and pattern spotting, that A.I. really started to take off. Then, around 2020-2022, a significant shift happened as conversational A.I. models-able to understand natural language and respond in a very human way-became available to the public, opening the door for everyone to explore. By 2023, A.I. had become a standard tool in workplaces, startups, CA Firms, Law firms, hospitals, and financial offices worldwide, transforming from a futuristic idea to a powerful partner in our daily lives.

Today, A.I. is no longer merely a technological invention-it has become a silent partner in our intellectual processes. It reads faster than any human, analyses legal documents with machine-like precision, summarises complex judgments within seconds, and drafts well-structured communication with remarkable ease. What once required a team of assistants and hours of manual effort can now be completed instantly with the help of A.I. systems. Yet, despite this exponential progress, A.I. is not-and can never become a substitute for human judgment, intuition, or professional experience. It cannot sense the intention behind a commercial transaction, interpret tone, assess departmental behaviour, or understand the real-world pressures and ethical responsibilities of a practising Chartered Accountant.

This distinction becomes especially important in areas like GST, where the law is highly contextual, always changing, and heavily reliant on specific facts. Even a small change in wording, a slight adjustment in contract setup, or a subtle shift in commercial intent can completely change the tax outcome-details that AI often doesn't fully grasp. While AI can boost our efficiency, help us research faster, and improve our drafting, it still doesn't have the real-world experience, deep domain knowledge, and interpretive wisdom that a seasoned GST professional provides.

The era of A.I. is all about working together responsibly, not replacing people. It's a time when technology supports our thinking without taking over, helping us do more without overshadowing our judgment. As A.I. becomes a bigger part of tax work, Chartered Accountants and other professionals have an essential role in using it wisely. Embracing A.I. is key, but it's crucial not to depend on it blindly. The real strength comes from blending A.I.'s quickness with human wisdom, creating a powerful partnership.

HOW AI IS RESHAPING THE CA PROFESSION AT WHIRLWIND SPEED

1. Speed That Redefines Human Possibility

AI's incredible speed is truly transformative for professionals, allowing tasks that once took hours to be done in just seconds. Imagine how, in the past, a GST practitioner would spend hours sorting through countless Finance Acts, notifications, FAQs, and circulars to review amendments. Now, thanks to AI, that same process takes under a minute! AI quickly scans all these documents, spots every change, organises them in order, and presents a clear, neat summary-almost as if an unseen assistant has done all the hard work for you.

Here's a helpful example that really brings this transformation to life. Imagine a mid-sized manufacturing company in New Delhi that used to spend 3 days each month matching thousands of vendor invoices, manually reviewing books and Form GSTR-2A to find mismatches. But then, it adopted an A.I.-powered reconciliation tool, and guess what? That same task was completed overnight-while the team was sleeping! The finance head humorously said, "What used to take three people three days now wraps up before sunrise, and no one complains." This isn't just about convenience; it's about freeing professionals from monotonous tasks so they can focus on what truly matters.

In GST litigation too, A.I. has made preparation much easier and quicker. When a taxpayer gets an 80-page show cause notice, A.I. can immediately point out the main allegations, past court decisions on similar matters, and relevant circulars. What used to take a week of effort now becomes a clear starting point in just a few minutes. A.I. isn't just about speed; it helps professionals have the time and mental space to think carefully and thoroughly.

2. A New Voice for Professionals: When Clarity Becomes Effortless

Drafting used to be a skill that developed over time through making mistakes, learning from mentors, and gaining experience. Now, thanks to A.I., this power is available to every professional. Young Chartered Accountants who once felt unsure when drafting responses are now able to create polished, convincing documents that sound as if written by experienced writers. A.I. supports in organising ideas, sharpening arguments, eliminating unnecessary words, and adding clarity where there was once confusion.

Let's consider a newly qualified CA. who took the time to prepare a thorough response to a challenging situation. His dedication and effort truly highlight the importance of careful preparation and commitment in his profession. GST audit query regarding the valuation of inter-branch services. Although technically sound, he lacked confidence in his drafting skills. Using A.I., he transformed his rough notes into a structured, elegant reply that even his senior partner appreciated. The client, impressed with the clarity, later commented that the reply "felt like someone with 20 years of experience wrote it."

Even in GST practice, A.I.'s mastery over language has quietly transformed the way professionals work. A Chartered Accountant, who manages multiple departmental audits each month, once found it challenging to prepare detailed replies within tight deadlines. Drafting complex responses, especially those involving valuation disputes or ITC restrictions, often took hours of careful thought and structuring. But after incorporating A.I. into his workflow, he dictates rough ideas into the system and, within minutes, receives a polished, well-organised, and professional-looking draft. For example, he faced a 40-page GST audit notice with many allegations. What used to take him an entire day to turn into a reply outline was neatly summarised and structured by A.I. before lunch. He later shared with relief, "A.I. didn't just save time-it saved my mental energy. I finally had the space to think like a CA instead of just a typist." This positive change has boosted not only his productivity but also his confidence when dealing with complex departmental questions.

3. Productivity Unlocked: When Machines Do the Heavy Lifting

Today's companies operate in a fast-paced world filled with endless data and pressing deadlines. Artificial Intelligence is now playing a crucial role in helping navigate this landscape, making tasks easier and more efficient. battlefield as a dependable soldier-performing the heavy tasks with precision, freeing human minds for higher-level thinking. Every GST return filing cycle, every vendor reconciliation, every compliance review becomes smoother with A.I.-enhanced tools.

One a real-world example comes from an FMCG company with over 1,200 distributors. Their finance team faced a monthly challenge in ensuring all distributors filed their GSTR-1 and GSTR-3B on time, as the company's input tax credit depended on their timely compliance. After introducing an AI-powered compliance monitoring tool, the system began predicting which distributors might file late based on their past behaviour. This allowed the company to proactively follow up, leading to a significant reduction in ITC mismatches. What was once a task relying on human memory and manual efforts has now become an efficient, automated system of intelligent monitoring alerts.

Internal audits have really been transformed in exciting ways! A well-known CA firm now uses A.I. to scan client ledgers for unusual entries, making the process more efficient and thorough. For example, the software flagged a ₹32 lakh consultancy expense asuncommon for a specific month. When they looked into it, they found out it was just a clerical mistake that led to the wrong debit. Before A.I., such errors might have gone unnoticed until the year-end, but now, thanks to artificial intelligence, errors are identified and addressed right when they happen.

Think of A.I. as a hardworking teammate-quick, careful, and ever watchful-supporting humans in their tasks. concentrate on work that requires insight.

4. A Partner in Research: Clearing the Fog Before the Real Journey Begins

In GST practice, the first challenge is often not interpretation but orientation-understanding the lay of the land. A.I. excels here. It reads judgments, extracts the core principles, summarises complex circulars, and displays conflicting interpretations in a simple framework. It helps professionals start their journey faster and more confidently.

For instance, when a CA gets a question about whether liquidated damages are taxable, A.I. instantly presents the divergent rulings across States, summarises the GST Council's position, and highlights the evolution of thought behind the law. Instead of getting lost in large volumes of legal material, the practitioner begins with clarity. A.I. clears the fog, enabling the CA to focus on deeper, scenario-specific analysis.

Even in academic and training environments, A.I. assists brilliantly. A GST professor in Bangalore uses A.I. before every lecture to collect recent judgments and prepare illustrative examples for his students. What once took hours of library research now takes a few minutes-leaving him with more time to organise discussions and case studies. His students find the classes more relevant, up to date, and engaging.

Thus, A.I. becomes not a provider of answers, but a guide-lighting the path and making the journey smoother for the professional mind that must ultimately walk it.

5. Creativity Without Limits: The Magic of AI in Entertainment

We've thoughtfully considered this quality, understanding that Chartered Accountants also appreciate some good entertainment.

If there's one area where A.I. has truly shown off its creative talent, it's in cinema and digital entertainment. The stories it helps create are incredible. Recently, a small production house in Hyderabad put together a historical battlefield scene with thousands of soldiers-without hiring any extras. A.I. generated everything-the army, the landscape, the dust clouds, and even the soldiers' movements-all in just a few days. What would typically cost a lot of money and take months in traditional filmmaking was actually done on a simple laptop.

A filmmaker in Kerala created an enchanting fantasy short film set in a mythical kingdom. Imagine majestic waterfalls, glowing towers, and floating islands-none of which exist in reality. Thanks to AI, these wondrous scenes came to life. He shared in interviews that he didn't make the film to impress others; instead, he did it because "A.I. made it possible to show the world what was once only in my imagination."

This revolution is about more than just glitz and glamour. AI empowers small creators, emerging storytellers, and artists with limited budgets to stand toe-to-toe with big studios. It truly makes creativity accessible to everyone. Now, a talented individual doesn't need a big budget to turn their dreams into reality-just imagination, and AI's incredible ability to bring those visions to life on the screen.

THE INVISIBLE GAPS AND LIMITATIONS OF AI

Why Technology Alone Cannot Navigate GST's Complex Landscape

1. Speed Without Understanding: When Fast Answers Become Dangerous

A.I. can respond quickly, but rushing through GST topics without fully understanding them can be risky. The law is often complex and depends on specific situations, with room for different interpretations. A.I. might give answers with confidence, even if it does not truly grasp the legal intent. It detects patterns in text but can not evaluate facts, compare scenarios, or interpret the purpose behind a provision. Working with GST requires careful reasoning, good judgment, and deep understanding-things that pattern matching cannot replace. Sometimes, A.I. might produce a perfectly structured, grammatically correct answer that is stillinaccurate, leading young professionals to trust its authority mistakenly. That's where the real danger lies.

Example 1 - The Export That Was Not an Export

A young Chartered Accountant (CA) in New Delhi turned to AI for advice regarding the architectural firm responsible for designing a bustling commercial complex in Dubai faced a straightforward question: Is GST applicable? Many AI tools confidently indicated that this was an "export of services" and thus qualified for zero-rating. However, when the young CA. Informed about this A.I. answer to his senior, he quickly spotted a subtle but crucial mistake: services related to immovable property are taxed under Section 13(4) of the IGST Act, 2017, based on the property's location. Since the building was in Dubai, the supply wasn't subject to GST and wasn't an export. Relying solely on AI could have led the client to file the LUT incorrectly, claim benefits incorrectly, and face potential issues later. At the same time, the AI focused on keywords, the CA.properly understood the relevant provisions of Section 13 of the IGST Act, 2017.

2. No Sense of Commercial Reality: When A.I. Cannot Read Business

Understanding the commercial substance of a transaction is essential for applying GST correctly. But A.I. sees only the words-not the business behind them. It cannot understand how a product is marketed, how customers perceive it, whether something is naturally bundled, or whether a recovery is part of value or a reimbursement. Commercial intention-often the deciding factor in GST-is invisible to A.I.

Example 2 - The Solar Inverter Misclassification

A CA in Bengaluru carefully explored the tax rules for a "solar inverter with integrated battery." This product is promoted as a complete, one-home system with a single warranty and installed as a single unit. However, A.I. provided three different classifications in three attempts, showing it struggled to grasp how the product works or how it's viewed in the market. To ensure accuracy, the CA visited the showroom, checked the packaging, examined warranty documents, and determined the right classification based on how the product is used and its market identity-something that goes beyond what A.I. can do.

3. Oversimplification of Law: When A.I. Matches Words but Misses Conditions

Many GST provisions, particularly those concerning valuation, rely on specific factual conditions. This makes the rules clear and helps ensure fair applications. A.I., however, tends to oversimplify. It assumes that if a transaction resembles a concept, it is that concept. But GST is a law of specifics. "At actuals" does not mean "pure agent." "One invoice" does not mean "composite supply." "Foreign client" does not mean "export." A.I.'s inability to test the finer conditions often turns simple queries into costly mistakes.

Example 3 - The Pure Agent Illusion

A multinational company in Mumbai covered hotel expenses for visiting employees from its parent company in the USA, and later settled the costs based on actual amounts. The AI quickly responded: "Not taxable-pure agent conditions satisfied." However, the Chartered Accountant (CA) knew that Rule 33 of the CGST Rules, 2017, is strict. In simple words, Rule 33 broadly provides a two-step test. In the first step, a person must satisfy all four cumulative conditions set out in the Explanation to Rule 33, which defines the term "pure agent". Then, in the second step,three cumulative conditions given in Rule 33 itself must be satisfied.

In the present context, the Indian Branch does not satisfy the condition (a) of the Explanation to Rule 33, which provides that a pure agent means a person who enters into contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of supply of goods or services or both. Hence, the Indian Branch did not fall within the statutory definition of the term "pure agent". Furthermore, condition (iii) given in Rule 33 also did not get satisfied because the Indian Branch did not provide any services of its own to its foreign parent company. Hence, the requirement of satisfaction of three cumulative conditions of Rule 33was also not met. However, the AI's reply was based on an oversimplification that could have led to a costly valuation dispute if taken at face value. This example highlights an important lesson: while AI can match words, it doesn't have the ability to verify whether legal conditions are truly met.

4. No Sense of Risk: When A.I. Cannot Predict Litigation or Departmental Behaviour

GST consultancy isn't just about knowing the law; it's also about sensing where potential challenges might arise. A seasoned CA easily identifies which positions might draw attention, which interpretations officers often reject, and where documentation gaps could lead to disagreements. Meanwhile, AI doesn't have this kind of insight. It has not been through an audit, received a show-cause notice, or negotiated with an officer. It lacks intuition, fears, or hands-on experience-elements that are so important in GST practice.

Example 4 - The ITC Reversal disaster averted

A construction company sought advice on reversing the ITC for non-payment within 180 days of the supplier's receipt of the invoice, in terms of the second proviso to Section 16(2) of the CGST Act, 2017. A.I. suggested a confident approach: "No reversal needed-book adjustments are enough." Some AAR rulings supported this perspective, which is why the machine confidently provided that answer. However, the CA advising the client immediately sensed potential issues. Based on experience, he knew that officers in that jurisdiction often rejected such explanations and instead required actual bank payments. He recommended a safer, more compliant approach to avoid future notices. While the machine offered a theoretical solution, the CA suggested a practical safeguard.

5. Different Tools, Different Answers: When A.I. Creates More Confusion Than Clarity

One of the most troubling limitations of A.I. is the absence of uniformity in its responses. In GST consultancy, professionals rely heavily on consistency in the law, in departmental practice, and in interpretational logic. But A.I. tools such as ChatGPT, Gemini, Perplexity, Copilot and others often provide completely different answers to the same question. Each tool is trained on different datasets, uses different models, and applies different reasoning patterns. As a result, what appears to be a straightforward GST query can produce a variety of contradictory answers, leaving the practitioner more confused than before. Instead of resolving doubts, A.I. sometimes multiplies them.

Example 5- Three AI Tools, Three Contradictory Answers on the Same GST Query

A practising CA in Indore recently faced this challenge. His client, a logistics company, sought clarity on whether "detention charges" received from customers for delayed unloading of goods were taxable under GST. To save time, the CA checked multiple A.I. platforms.

• ChatGPT responded that the charges were taxable, treating them as part of the value of supply under Section 15.
• Gemini confidently classified them as not taxable, calling them "compensation" outside the scope of GST.
• Perplexity offered a third view altogether-claiming that detention charges were taxable only if charged under a contractual clause, and exempt otherwise.

All three answers were structured, well-written, and sounded convincing yet all three were different. None of the tools examined how courts had interpreted similar charges under GST or during the service tax regime. None considered whether the charges had a nexus with the original supply. None understood that "detention charges" are generally treated as an extension of the main service, attracting the same tax treatment, as upheld in several decisions.

The CA realised immediately that relying on any one of these answers would expose the client to future disputes. He eventually advised taxability based on his understanding of valuation principles, past jurisprudence, and departmental behaviour. The experience reinforced a powerful truth-A.I. may give you many answers, but only your judgment can decide which one is correct.

A Message for Every GST Consultant - Why Your Mind Must Lead and AI Must Follow

In GST consultancy, a single piece of incorrect advice can be very costly, not just financially but also in terms of trust. Incorrect tax positions can lead to demands, penalties, interest, and lengthy legal battles. Even more unfortunate is how it can shake the client's confidence. Unlike income tax or accounting errors, GST doesn't offer easy ways to backtrack. Once a position is taken-whether it's a filed return or an interpretation, it becomes a part of the permanent record, following the client through every audit and assessment.

That's why it is so vital that A.I. shouldn't replace human judgment. While A.I. can offer speedy responses, it does not possess the wisdom or understanding that people naturally have. It can assist with drafting answers, but final decisions are best left to humans. It can recite laws, but interpreting them requires a human touch that A.I. can't provide.

A Chartered Accountant should always trust his own judgment, combining his training, experience, and instinct. The human mind is the most vital tool; AI serves as a helpful second support.

Concluding Reflection for the Modern Professional

As we stand at the exciting crossroads where technology meets human intelligence, there's so much to look forward to. It's exciting to see how A.I. is such an incredible tool. However, it's important to remember that wisdom is something truly special and uniquely human. Humans deserve credit for creating A.I. (Artificial Intelligence). It has broadened what we can do, sped up our tasks, and changed how we manage information. It's opened up opportunities that once took a lot of time, effort, and resources. Still, despite its impressive capabilities, A.I. is ultimately just a machine-one that works without judgment, caution, or accountability.

GST, in contrast, is a fascinating field that relies on interpretation, intention, and experience. It invites a thoughtful mind that can read easily and understand deeply, grasping both the law and the subtle nuances. Such a mind can interpret commercial substance, foresee potential litigation risks, and appreciate that one wrong move today can have lasting consequences. That's why Chartered Accountants remain so important - not just as legal experts, but as trusted protectors, guiding lights for businesses, and stewards of financial honesty.

The future will undoubtedly bring more sophisticated tools, more intelligent algorithms, and faster systems. However, no matter how sophisticated technology becomes, it simply can't replace the importance of professional judgment. It can not stand in for the experience and insight that only experts bring to the table. before a tax officer, cannot explain a client's position, and cannot shoulder responsibility when challenges arise. That duty belongs to the CA because it is the CA who carries experience, instinct, and the courage to take ownership of every opinion rendered.

As A.I. advances rapidly, embrace your wisdom even more. Feel confident using technology, but stay thoughtful and cautious. Let it help improve your work, but trust your own judgment to guide you. In the ever-changing world of GST, true success will go to those who blend the speed of A.I. with the depth of human insight.

The next chapter of professional excellence will be shaped not just by machines, but by the vibrant spirit and creativity of talented individuals everywhere, along with the professionals who skillfully harness those talents. As machines become smarter, more responsible, and more visionary, the journey ahead is exciting. Throughout it all, Chartered Accountants will remain a steady voice of reason, guardians of accuracy, and trusted protectors in our increasingly automated world.

A PERSONAL TRIBUTE

In Loving Memory of My Beloved Renu

Before I close this article, I feel a deep moral and emotional responsibility to acknowledge the truth. This has been the source of strength behind every word I've written over the past six months. I dedicate this work and every article that preceded it to the unconditional love, unwavering support and evergreen memory of my late wife Renu Jaggi.

Even though she's no longer physically here with me, her presence still brightens every part of my life. Her love, gentle wisdom, and belief in me continue to resonate within me like a calming, guiding light. Whether I'm sitting down to write, facing a new challenge, or striving for my best, I feel her invisible hand on my shoulde,r cheering me on, keeping me steady, and reminding me that I am capable of achieving so much more than I often realize.

Today, my writing speed and clarity-sometimes almost like the pace of A.I.-aren't just driven by technology. They're deeply inspired by her spiritual companionship. She endlessly encourages me to keep moving forward, grow, create, and contribute. Every article I write is a heartfelt tribute to her values, her warmth, and her lasting influence on my life.

If my words have touched or benefited even one reader, the true credit goes to her. Her memory remains my silent teacher. Her love remains my eternal strength. And her presence-though unseen-remains with me in every step I take.

This work is for you, Renu, today and always.