GST AND THE DIGITAL ECONOMY: ASSESSING THE ROLE OF DIGITAL PAYMENTS AND E-COMMERCE IN ENHANCING TAX COMPLIANCE AND REVENUE REALIZATION IN POST-GST INDIA

COMMERCE

The adoption of digital payments and rapid growth of e-commerce have transformed India’s indirect tax ecosystem under Goods and Services Tax (GST), prompting a re-examination of their combined effect on tax compliance and revenue realization. This review paper synthesises recent empirical and conceptual research to assess whether the expansion of the digital economy has strengthened GST compliance and enhanced tax collections in post-GST India. Evidence from time-series and cross-sectional analyses suggests a robust positive relationship: studies report that increases in digital transactions (via payment platforms) significantly boost GST revenues. Concurrently, e-commerce and online services have broadened the tax base by formalizing previously informal traders and facilitating traceable, transparent transactions under digital invoicing and returns systems. However, several challenges persist: compliance burdens for small sellers, limited digital literacy and infrastructure in some regions, and regulatory ambiguities — especially for micro-merchants and cross-border digital service providers. The review concludes that while digitalization under GST has contributed substantially to improved tax compliance and revenue outcomes at the national level, the gains are not uniformly distributed across states, sectors, or business sizes. Significant gaps remain in micro-level studies, region-specific analysis (including retail and wholesale segments), and evaluation of how digital payment adoption affects small and informal enterprises. These gaps highlight the need for further empirical research — including region-based studies such as the proposed investigation in selected areas of Andhra Pradesh’s retail and wholesale sectors.

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