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Taxpayers compliance rating under GST

GST Compliance Rating

The GST ratings will be made public on the GST Network (GSTN) as tax authorities seek to build peer pressure among companies to ensure compliance.

Taxpayers registered under the goods and services tax (GST) regime will be assigned a rating, based on how promptly they upload invoices, pay taxes and file returns.


Taxpayers registered under the new goods and services tax (GST) regime that is set to be implemented from 1 July will be assigned a rating, based on how promptly they upload invoices, pay taxes and file returns. The ratings will be made public on the GST Network (GSTN) website as tax authorities seek to build peer pressure among companies to ensure compliance.

The rules that govern the new indirect tax regime require the matching of invoices for claiming input tax credit. For example, a manufacturer procuring goods from a supplier will not be able to claim credit for the tax paid until the seller uploads the invoices and the claims of the manufacturer and supplier are matched.

This means that in case two suppliers offer the same price to the manufacturer, the company may opt for the one that has a better compliance rating. If two vendors are offering similar prices to a manufacturer, the latter will opt for the firm that uploads its invoices and files returns on time and hence has a better rating.” For this reason, many big manufacturers, especially in the automobile and consumer goods industries, are working with their suppliers to train them for the transition to the GST regime.

“Regularity in uploading the invoices, filing of returns and taxes will be the main criterion for rating the taxpayers. The ratings will be updated at periodic intervals and also will be put up in the public domain,” said Prakash Kumar, chief executive of GSTN.

According to the model GST law, refund claims under the GST regime will also be processed on merit basis, i.e on the GST compliance rating of the registered taxpayer. It is expected that certain slabs rates will be maintained for various taxpayers falling under various bandwidths of compliance rating and the refunds will be made in terms of percentage amount based on the individual rating of the taxpayer.

It is expected that GST compliance rating scores may be used for identifying compliant tax payers which may get better administrative treatment or response, ascertaining risk profile of tax payers, data integrity / audit of tax payers records, selection of cases for audit or scrutiny etc. A taxable person with higher rating may be given certain privileges while a lower rating may invite enhanced surveillance. This may also instill healthy competition amongst tax payers for attaining a higher rating leading to enhanced reputation and as an indicator of good governance.

The central GST bill that received Parliament’s approval last week also has a provision to facilitate the ratings. “Every registered person may be assigned a goods and services tax compliance rating score by the government based on his record of compliance with the provisions of this Act,” it says, adding that the parameters will be prescribed.


Benefits of the GST Compliance Rating

Better GST compliance ratings develops trust among your customers. When your business has a better compliance score, you not only have a better chance of earning the government’s trust, but you also are more likely to earn the trust of clients you could be doing business with in the future. This may seem like a small step in the beginning, but consider the impact that thousands of businesses can have on the GST network if they all collectively work towards GST compliance. If individual business owners work to follow the new laws, then they will help the entire GST ecosystem to stay compliant.

3 Steps to Maintain GST Compliance

As a business owner, it’s important that you understand the significance of being GST compliant, but that alone is not enough; you also need to know what it takes to be compliant in the first place.

File your GSTR-1, GSTR-2 and GSTR-3 on time

Businesses should include all their outward and inward supply transactions on their monthly GSTR-1 for sales, GSTR-2 for purchases and GSTR-2 for returns. They should file their GSTR-1, GSTR-2 and GSTR-3 for a particular month by the 10th, 15th and 18th respectively of the following month.

Pay your tax dues

Before filing their next tax returns, businesses should first ensure that they’ve paid all their tax dues. According to section 27(3) of the GST legislation, filing a GST return with existing tax dues would make the next return invalid. This would reduce a company’s compliance rating score and could even trigger a chain reaction along the supply chain, making it difficult for their buyers to claim input tax credit.

Submit Annual Return

Apart from filing the GSTR-1 and GSTR-2 on a monthly basis, businesses should also submit a consolidated annual return called the GSTR-9.



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