OpenTax - A Blockchain-based Transparent Taxation System

An Open, Transparent & Scalable Taxation System

OpenTax is a decentralized taxation platform built on Ethereum blockchain that aims to transform how taxes are levied, paid, tracked, and audited in India.

The system replaces fragmented, opaque, and centralized tax portals with a single transparent blockchain-based ecosystem, enabling citizens, government admins, and auditors to interact with taxation data in a trustless and verifiable manner.

This project was developed as an academic project for Blockchain Technology course.

Motivation & Background

India’s taxation infrastructure faces several systemic issues:

• Multiple tax portals for GST, Income Tax, etc.
• Centralized databases prone to manipulation
• Limited visibility into government fund allocation
• High dependency on intermediaries for tax compliance
• Lack of real-time auditing for citizens

Citizens pay taxes but cannot verify how funds move once collected.

Audits are post-mortem and controlled by a limited authority.

OpenTax was conceptualized to solve this using blockchain.

Problem Statement

The core problems addressed:

1. Fragmentation

   • Separate infrastructure for each tax type
   • Poor user experience and repeated compliance effort

2. Lack of Transparency

   • Citizens cannot track fund allocation
   • Government accounts are opaque

3. Centralized Trust Model

   • Data integrity depends on central authorities
   • Susceptible to corruption and tampering

4. Complex Tax Compliance

   • Requires third-party services
   • Increases cost and reduces trust

Proposed Solution

OpenTax introduces a decentralized taxation ecosystem using:

• Ethereum blockchain as a public ledger
• Smart contracts for automated tax logic
• Tokenized INR (RupeeToken) for value exchange
• Web3-based DApp for user interaction

Core Idea

Every tax payment, bill generation, fund transfer, and refund is executed and recorded on-chain, making the entire taxation lifecycle transparent, immutable, and auditable.

High-Level System Overview

Actors in the System

• Normal Users (Citizens / Businesses)
• GST Admins
• Income Tax Admins
• Privileged Admins
• Token Minters
• Public Auditors (read-only)

Key Capabilities

• Unified tax payment interface
• Role-based access control
• Real-time auditability
• Automated fund splitting (CGST/SGST/IGST)
• On-chain record of government accounts

System Architecture

Architectural Layers

1. Client Layer

   • Browser-based React DApp
   • MetaMask wallet integration
   • Web3 provider injected into browser

2. Application Layer

   • ReactJS + Material UI
   • useDApp & ethers.js for blockchain interaction
   • Role-based UI rendering

3. Smart Contract Layer

   • Multiple modular Solidity contracts
   • Deployed on Ethereum (Ganache for testing)

4. Blockchain Layer

   • Immutable transaction ledger
   • Public auditability

The system architecture ensures separation of concerns, modularity, and future scalability.

Access Control & Security Model

Access is enforced using a Privileges Smart Contract, which defines:

• Privileged Admins
• GST Admins
• Income Tax Admins
• Token Admins
• Authorized Minters

Each sensitive function across contracts checks:

• msg.sender role
• Explicit permission mapping

This ensures:

• No unauthorized minting
• No illegal fund transfers
• No privilege escalation

Smart Contract Architecture

OpenTax uses five core smart contracts that work together:

Privileges Contract

Purpose

• Centralized role & permission management

Responsibilities

• Add/remove admins
• Verify role permissions
• Enforce access control

Why it matters

• Prevents unauthorized access
• Enables governance-level control
• Used by all other contracts

RupeeToken Contract (ERC20-based)

Purpose

• Tokenized representation of Indian Rupees

Key Features

• 2 decimal precision (paise)
• Mint & burn controlled by authorized minters
• Used for all tax payments and refunds

Why Tokenization?

• Enables atomic transfers
• Ensures transparent fund movement
• Simplifies on-chain accounting

Interactions Contract

Purpose

• Central coordination contract

Responsibilities

• Government account creation
• Fund transfers between accounts
• Fiat ↔ token ledger mapping
• Admin request handling

Key Design Decision

Acts as a single source of truth for:

• Government accounts
• Requests
• Fiat transaction verification

GST Contract

Purpose

• Handle GST-specific logic

Admin Capabilities

• Create GST user accounts
• Generate GST bills
• Transfer refunds

User Capabilities

• View bills
• Pay GST
• Automatic CGST/SGST/IGST split

Notable Feature

• Interstate vs Intrastate GST handled automatically via smart contracts

Income Tax Contract

Purpose

• Handle income tax lifecycle

Admin Capabilities

• Add taxpayers
• Add yearly tax liabilities
• Update outstanding amounts

User Capabilities

• View tax history
• Pay partial or full tax
• Automatic outstanding balance updates

Transaction Flow Examples

GST Payment Flow

1. GST Admin generates bill
2. User views bill via DApp
3. User pays bill using RupeeToken
4. Smart contract - Splits funds (CGST/SGST or IGST), Transfers to government accounts
5. Transaction is publicly auditable

Token Minting Flow

1. Token Admin verifies incoming fiat payment
2. RupeeToken is minted to user wallet
3. Ledger entry stored on-chain
4. Balance immediately reflected in DApp

DApp Implementation

Frontend Features

• Wallet connect & auto-detection
• Dynamic UI based on user role

Separate modules for:

• Privileged Admin
• Minter
• GST
• Income Tax

UI Highlights

• Admin dashboards
• Form-based interactions
• Real-time balance updates
• Transaction confirmation via MetaMask

Tech Stack

Blockchain & Smart Contracts

• Ethereum
• Solidity
• Remix IDE
• Ganache

Web3

• MetaMask
• ethers.js
• useDApp
• web3.js

Scalability & Extensibility

The platform is designed to support:

• Additional tax types (Road Tax, Stamp Duty, etc.)
• Generic tax modules
• Central & state-level expansion
• Automated banking integrations
• Public fund tracking (relief funds, schemes)

My Role & Contributions

• Designed entire system architecture
• Implemented all major smart contracts
• Built React-based DApp
• Integrated Web3 wallet & contract logic
• Led end-to-end development & testing

Key Takeaways

This project demonstrates my ability to:

• Design complex Web3 systems
• Write secure, modular smart contracts
• Build full-stack decentralized applications
• Apply blockchain to real-world governance problems

OpenTax reflects my interest in transparent public infrastructure and decentralized finance systems.