India needs a compliance stack

There is a deeper reason why compliance laws in India often feel suspicious. The state cannot perfectly observe private information — whether a declaration is accurate or strategic, whether a mistake is honest, or whether a firm is a lemon pretending to be a peach. When information is scarce, the law ideally becomes risk-averse. It asks for repeated forms and multiple permissions, as it cannot easily separate the trustworthy from the risky. Subsequently, adherence to compliance laws in India continues to remain shrouded in haze.

Compare these with the enormous progress India has made in digital tax administration in the last decade. Returns, payments, challans, tax deducted at source (TDS) information, goods and services tax (GST) filings, refunds, and notices now move through digital systems that are anonymous and faceless. However, in a similar vein, tax compliance is still experienced as a calendar of forms, reconciliations, thresholds, circulars, extensions, and anxieties. The World Bank’s last Doing Business profile for India, a historical benchmark, recorded 11 tax payments taking 252 hours a year. Singapore records five payments taking 64 hours.

India can clearly solve this problem with an artificial intelligence (AI) compliance stack/copilot. As an example, an AI compliance stack would not dilute tax enforcement. It would make routine obligations intelligible. A founder could ask — do I need to deduct TDS on this payment? When is my next GST return due? What records must be kept? Has my turnover crossed a registration threshold? Is there an updated return or correction route available? What evidence is needed if a notice arrives? The system would not give private legal advice, but it would instead provide authenticated public guidance, with citations and in a language that a normal business owner can understand.

The economic case is straightforward. The ministry of corporate affairs (MCA) reports more than 31 lakh registered companies and over 20 lakh active companies. If even 50 hours a year were saved for each active company, India would release more than 10 crore business hours. Those hours could go into product development, customer service, worker training, export preparation, or research. Compliance reform is therefore not a favour to businesses. It is a productivity reform; and for start-ups and micro, small, and medium enterprises, it may be the difference between disciplined growth and procedural exhaustion.

Other countries have already built parts of this idea. The European Union’s Single Digital Gateway regulation advances the once-only principle, under which citizens and businesses should not repeatedly provide evidence already held by public authorities. Estonia’s X-tee data exchange layer and Bürokratt virtual-assistant programme show how digital identity, data exchange, and conversational government can be connected. The UK’s Making Tax Digital programme moves specified tax obligations towards digital records and compatible software. Canada’s BizPaL helps firms identify permits and licences required by participating governments. None of these systems is a complete model for India, but together they show the direction of travel — less repetition, more data reuse, clearer guidance, and software-assisted compliance.

India need not imitate any one country. It can build a fuller model because it already has significant important foundations. The MCA has a large corporate data platform. The National Single Window System (NSWS) brings together central and state approvals. Parivesh (Pro-Active and Responsive facilitation by Interactive, Virtuous, and Environmental Single Window Hub) functions as a single-window system for environment, forest, wildlife, and coastal regulation clearances. The Jan Vishwas Act, 2023, has accepted the principle that many technical offences should be decriminalised and rationalised in the interest of trust-based governance. These are not minor steps. They show that the state is already moving from paper to platform administration. But the missing layer is interpretation and integration.

The reform should ideally begin with a Common Business Compliance Account. If a company has already provided its registered office, directors, beneficial owners, Personal Account Number, GST identification number, employee count, bank details, factory location, and environmental category to one public authority, another should not demand the same information again unless there is a material change or a risk-based reason. The system should generate a live compliance calendar across the MCA, GST, income tax, Employees’ Provident Fund Organisation, Employees’ State Insurance Corporation, labour, environment, NSWS, Parivesh, and state systems. It should auto-populate repeat fields, flag inconsistencies, and give firms a plain-language cure path for first-time non-material defaults.

The safeguards should be built in from the start. The AI system should be publicly governed, based only on authoritative legal material, updated through a controlled publication workflow, and independently audited. It should not make adverse decisions by itself. It should be a compliance guide, not a surveillance shortcut. Data minimisation, purpose limitation, role-based access, audit trails, privacy protection, and appeal rights must be part of the design. There should also be a limited safe harbour — if a business acts in good faith on current, source-cited official guidance, the first response to a technical default should be correction, not prosecution.

The next phase of compliance reform should therefore be practical and measurable. We must create an authenticated machine-readable corpus of central and state compliance law and connect it to a Common Business Compliance Account. We should then build a source-citing AI interface in English and Indian languages. Finally, we must publish a dashboard showing the filings eliminated, fields auto-populated, time saved by businesses, and serious cases taken up by regulators.

India’s next reform wave should treat compliance not as paperwork, but as economic infrastructure.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.