Month-end financial closing demands significant time and resources. From calculating indirect tax payments and reconciling invoices to conducting audits and filing returns at the nth hour, the finance team in your office is burning the candle at both ends. However, this monthly strain is no longer inevitable. By leveraging Artificial Intelligence (AI), organisations can automate these manual, time-consuming processes, thus empowering finance professionals to focus on strategic growth and drive measurable business impact.
Unlike direct tax, which is levied on a person’s income/wealth, indirect tax is applied to the purchase of goods/services (think sales tax, GST, excise duty, etc.) and is remitted to the government by businesses which collect it. But with the rules of commerce rapidly evolving, managing indirect tax is no mean feat. Add to this the challenges of legacy tax management systems, which can weigh down even the best professionals. It’s no surprise then that companies are increasingly relying on AI to enhance accuracy and mitigate risks. As per a 2025 global survey by Hanover Research and Avalara, 84% of the respondents reported heavy AI usage for tax functions, a huge uptick from the previous year.
Let’s take a deeper dive into the pain points afflicting indirect tax professionals and why they must tap into technology to iron out the creases.
- Data/transaction volume: High transaction volume can overwhelm systems, leaving businesses with fragmented/siloed data, which is difficult to manage. This makes reporting a labour-intensive and time-consuming job.
- Manual processes/human errors: Extracting data from Enterprise Resource Planning (ERP) systems and formatting it into spreadsheets is not only tedious but also error-prone. So is verifying whether invoices comply with tax regulations. Overworked staff are more likely to make erroneous calculations and can even miss claiming input tax credits on purchases, leading to overpayments.
- Diverse laws and volatile regulatory environment: With different countries following different indirect tax structures (for example, Value Added Tax, Goods and Services Tax etc.), cross-border businesses have their task cut out — navigating a labyrinth of regulations. And with these rules changing ever so frequently, they must keep up with everything new.
- Audit risks and penalties: Improper data management and documentation can create blind spots, raising the eyebrows of regulatory authorities and increasing the risk of audits and penalties.
To address these challenges effectively, businesses must fully embrace technological innovation. Artificial Intelligence extends far beyond basic data processing; here is how it acts as a strategic asset:
- Workflow automation: Like in any other industry, here too AI-powered automation replaces routine, error-prone tasks with streamlined, repeatable workflows. For example, AI models can interpret supplier data to determine taxability, calculate indirect taxes, reconcile vast volumes of sales/purchase invoices, and file returns at far greater speeds than human agents, saving time and enhancing productivity.
- Accuracy/error detection: AI systems evaluate large datasets in real time to spot discrepancies like incorrect tax rates, mismatched vendor addresses, or fraudulent input tax credit claims to ensure timely filings.
- Predictive analytics/forecasting: AI-powered systems can analyse historical data and transaction patterns to identify patterns and anomalies, enabling businesses to forecast tax liabilities, identify leakages, and proactively address compliance challenges by optimising strategies.
- Real-time regulatory monitoring: AI agents can continuously track global indirect tax databases (guidelines) and circulars so that businesses can stay informed about rule changes in real time. They automatically generate alerts and summarise how these changes affect specific product codes or regions, turning complex legal updates into actionable insights for better compliance.
- Audit defensibility: Intelligent systems operate with transparency by linking automated decisions back to the respective regulatory databases/sources, ensuring risk scores and tax treatments are fully explainable to revenue authorities. By generating traceable digital audit trails, they help protect the reputation of businesses.
Leading global enterprises like Microsoft, Siemens Energy, Apple, and Unilever are banking on AI-powered taxation services tools for real-time tax compliance across global marketplaces. And the benefits are for everyone to see.
Leave grunt work to AI, while humans fortify strategy
But like genies who are bound by certain rules, even AI must be deployed with some guardrails to ensure it functions ethically, responsibly, and in alignment with organisational standards. Also, human oversight remains non-negotiable as indirect tax decisions often depend on careful interpretations and prudent judgments, which should be left to experienced professionals. By leveraging the power of AI while maintaining a human-in-the-loop approach, businesses can experience the best of both — operational precision, technological agility, and strategic foresight.
If you are wary of AI’s impact, start small. First, get a comprehensive grasp of the technology, its advantages, and limitations. Second, train your finance team in AI governance. Third, test the waters before taking a deep dive. Leaders who can strike the right balance — knowing where AI strengthens compliance and where it introduces risk — will build resilient and highly scalable tax functions.
How Infosys BPM can help
Tax compliance can be tedious and requires strong expertise to navigate legislative changes. Infosys BPM offers digital tax solutions, leveraging advanced technologies like AI to automate tax processes for accuracy and compliance, while reducing manual effort. By integrating these tools, we streamline operations and provide real-time insights for better tax management.
