Lok Sabha Question No. 4292 (UNSTARRED), answered on 2023-03-27
Subject: Use of Data Analytics in Tax Administration
Ministry: FINANCE
Asked by: Vishnu Dutt Sharma

Government of India Ministry of Finance Department of Revenue

## LOK SABHA

## UN-STARRED QUESTION NO. 4292

TO BE ANSWERED ON MONDAY, MARCH 27, 2023 Chaitra 6, 1945 (Saka)

## USE OF DATA ANALYTICS IN TAX ADMINISTRATION

## 4292. SHRI VISHNU DATT SHARMA:

Will the Minister of Finance be pleased to state:

(a)  whether  the  Government  is  taking  any  steps  to  introduce  data  analytics,  big  data  and  artificial intelligence in direct and indirect tax administration, so as to make it more effective, free of official discretion, business and taxpayers friendly; and

(b) if so, the details thereof and if not, the reasons therefor?

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## ANSWER (SHRI PANKAJ CHAUDHARY)

( a ): Government is using data analytics, big data and Artificial Intelligence/Machine Learning in tax administration to make it more effective, free of official discretion, business and taxpayers friendly. Data analytics is being used to identify fiscal risks, suspicious trends and  patterns and risky entities in Customs and GST by leveraging big data.

( b ): Indirect Taxes: The Project ADVAIT (Advanced Analytics in Indirect Taxes) has been rolled out in 2021, as a flagship analytics project for Indirect Taxes, by CBIC. The project uses capabilities of big data and Artificial Intelligence as well. ADVAIT has been envisaged with a threefold objective of enhancing Indirect Tax revenue, increasing taxpayer base, and supporting data-driven tax policy.

Further,  ADVAIT provides business outputs  in  three  formats:  Reports,  Interactive  Dashboards, and  Analytical  Models.  The  functionality  of  each  output  is  specifically  designed  to  aid  and  assist officers  in  their  day-to-day  operations  that  range  from  reporting  and  ensuring  tax  compliance  to detecting  tax  evasion.  The  portal  has  advanced  analytical  capabilities  including  data  matching, network analysis, pattern recognition, predictive analytics, text mining, forecasting and policy studies. ADVAIT has been designed and developed in a knowledge-driven data ecosystem using some of the most  advanced  data  warehousing  business  intelligence  solutions,  keeping  in  view  the  3  I's: Information, Insights, and Intelligence.

Direct Taxes: The  Income Tax department is using techniques as data analytics, big data and Artificial Intelligence/Machine Learning for:

- (i) Identifying cases with High Risk of tax evasion and high likelihood of income addition, for further scrutiny.
- (ii) Identifying taxpayers to send reminders for advance tax payments.
- (iii) Prompting specific taxpayers about apparent mismatches in ITRs and transactions made, so that taxpayers may revise their returns.
- (iv) Using big data techniques for storage and effective search of information by income tax officers.
- (v) Using data analytics over networks of taxpayers visualize the taxpayers relationships and to flag potential high-risk transactions.
- (vi) Using data analytics techniques for segmentation of taxpayers to focus campaign on highrisk cases from tax evasion perspective.