From compliance to care 

How India’s DPI and Gen AI can redesign the tax system for trust, growth and net-zero outcomes 

India’s tax crisis: A system designed to police, not enable 

Today, MSMEs, the lifeblood of India’s economy, lose 14% of their annual revenues to compliance-related costs. Nearly Rs 12 lakh crore remains stuck in litigation. Raids, mismatches, and audits continue to erode trust between businesses and the state. 

Yet, most MSME entrepreneurs do not evade taxes. They are overwhelmed by complexity, under-resourced, and digitally underserved. The very system designed to collect taxes ends up stifling the very growth it seeks to measure. 

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It’s time to reimagine tax not as surveillance, but as service. 

The Gen AI shift: From filing returns to finding purpose 

Let’s pause on the latest Gen AI trends: Therapy and companionship now top the list. Organising my life and finding purpose are new, top-tier use cases. Technical search and text editing are no longer dominant. Users seek context-aware, emotionally intelligent, ongoing support. AI must operate not just as a tool, but as a companion to personal development. 

India can apply this insight to governance: We must redesign tax systems that understand, coach, and liberate our businesses, not entrap them. 

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A new DPI-GenAI framework for MSMEs 

1. TaxBot as coach, not collector: An AI-powered Tax Companion, built on ONDC, Aadhaar, GST, and Account Aggregator data, guiding every MSME on deductibles, due dates and automated resolutions.
2. Integrated dataset for compliance + net zero: Real-time AI classification enables automated tax and ESG reporting, carbon tracking, and green financial nudges. 
3. Litigation-free, blockchain-based recordkeeping: Blockchain GST records enable reconciliation and dispute resolution before conflict arises, eliminating tribunal backlogs. 

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From MSME despair to entrepreneurial confidence 

This model could reduce compliance costs to near zero, formalise 20 million new firms and release over Rs 50,000 crore locked in dispute resolution.

It reframes the tax ecosystem as a source of trust, personalisation, and support, aligned with India’s aspiration to become the world’s most entrepreneurial democracy. 

What boards and policymakers must do next 

1. Legislate the Digital Tax India Act, 2025. 
2. Create a DPI-Tax ESG Stack for unified data management. 
3. Launch the Tax Companion Pilot in Gujarat and Karnataka. 
4. Frame taxation as a purpose, not a punishment. 

The larger prize: Net-zero, litigation-free growth 

This approach not only frees MSMEs, but also makes India’s tax and ESG systems global export products. Just like UPI is being adopted worldwide, a DPI-tax-Gen-AI integration model can become a template for the Global South. 

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The future of governance is not just digital. It is empathetic, AI-enabled, and purpose-aligned.