GST Compliance Rating

STATUTORY PROVISIONS

The verbatim of Act/Rule is as under:

Section 149 of the GST, 2017 contains provision in respect of GST compliance rating as under:

(1) 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

(2) The goods and services tax compliance rating score may be determined on the basis of such parameters as may be prescribed.

(3) The goods and services tax compliance rating score may be updated at periodic intervals and intimated to the registered person and also placed in the public domain in such manner as may be prescribed"

GST Compliance rating is a system under which the GST authorities rates your business based on how well your business has adhered to the GST rules and regulations. GST Compliance Rating scale starts from 0 and can go up to 10. However, you can change your GST Compliance Rating over time by adhering to the rules and regulations. The main goal of the GST Compliance Rating is to encourage taxable entities to be adequately GST compliant and punctual with their invoice submissions and upload other documents. It is paramount that the process is streamlined to save time.

COMPLIANCE RATING

It is a new concept. Compliance Rating in GST seeks to bring transparency to the entire GST compliances and administration by way of assigning compliance ratings. All registered taxpayers will be publically rated according to how they comply with ST regulations. As per Section 149 of the CGST/SGST Act, every registered person shall be assigned a compliance ting based on the record of compliance in respect of specified parameters. Such ratings shall also be placed in the public domain. This will create healthy competition amongst taxable persons.

MEANING & SCOPE OF COMPLIANCE RATING

Simply put, the GST compliance rating is akin to a performance ranking of all registered taxable persons which tells you how compliant they are with respect to the GST provisions. This will be irrespective of nature, size, or turnover of the business. For example, a rating system can be devised on a scale of 1 to 10, with 10 being the highest compliant and 1 being least compliant.

Do note that the above example was used for demonstration only, and the actual parameters of the GST compliance system have not yet been made public.

Why is it essential to maintain compliance rating score?

Adhering to so many regulations becomes burdensome but it is vital to maintain a compliance rating score. This score can impact business in many ways as it is placed on public domain by the GST Network.

BENEFITS OF COMPLIANCE RATING

• Buyers may get input tax credit immediately.
• Higher GST compliance will attract more business
• They'll get their refunds immediately.
• Enjoy better reputation
• Reduce chances of an audit by the tax authorities.
• May be used by banks /suppliers as a benchmark
• Add to good governance aspects of Organization
• Will facilitate better negotiation with suppliers

How will you know your GST rating?

The compliance rating score will be updated periodically. It will be intimated to the taxpayer and also be available publicly.

WORKING OF COMPLIANCE RATING

According to section 149(3) of the CGST Act, 2017, the compliance rating score in GST shall be updated periodically. The same shall be intimated to the taxable person and also placed in the public domain, in the manner pr However, the parameters, criteria and methodology have not been notified yet, but it is expected that compliance rating scores may be based on following:

timely payment of taxes

• timely e-filing of monthly/quarterly returns
• matching of transactions
• adherence to various time limits.
• cooperation in dealing with the tax Department etc.
• filing of regular and annual returns timely and correctly
• correct utilisation of input tax credit and its disclosure
• correct deduction of TDS/TCS, wherever applicable
• findings in scrutiny of returns/audit findings
• refund claims etc.

CRITERIA FOR COMPLIANCE RATING

The following points depicts the important factors which will form the basis for Compliance Rating .

1. Making payments on time
2. Matching / Reconciliation of transactions
3. Filing returns in time
4. Cooperation with Authorities
5. Other time limit provisions to be complied

ADVANTAGES OF GST COMPLIANCE RATING 

• Helpful to Excel in the Competitive Business Market
• Promising Opportunities for Better Operation
• Enormous Opportunities to Expand Your Business
• Reduces the Chance of Going Under Inspection

STEPS IN GST COMPLIANCE RATING

• Review of Rating
• Review and compliance assessment
• ✓Assignment of rating
• ✓Publication / access of rating

How to know your GST Compliance Rating?

When a business is registered, the person will be issued a GSTIN (Goods and Services Tax Identification Number). This number will help you keep track of your compliance rating. Using this number you can know your rating once the scores are made public on the GST Network (GSTN). All you have to do is to access the portal. Note that since it is public, other people can know your ratings too.

WHAT DETAILS ARE TO BE PUBLISHED IN THE GST COMPLIANCE RATING?

GST compliance rating reflects a simple score. According to the GST act, no information regarding any particular return identifying a respective person can be published without their consent. The act also doesn't allow any third party to access information or any returns. Therefore, the compliance rating should not contain details like -

• Suppliers name
• Customers name
• Turnover amount
• Products or services supplied

OBJECTIVES OF COMPLIANCE RATING

• Efficient input tax credit mechanism: A person can claim an input tax credit in GSTR-2 (return with purchase details for the month) only when the seller also files his GSTR-1 (return with monthly sales details), and the details on both these forms reconcile or match with each other. This was not so earlier.
• The rating of a taxable person would be relevant to determine the eligibility of input tax credit in respect of inward supplies, selection for o the scrutiny and other administrative/monitoring purposes. The rating would be based on tax payer's record of compliance with the provisions of CGST, SGST and IGST. The details of parameters and methodology for rating would be prescribed.
• Preferred supplier chosen by buyers / Increase customer base: As compliance rating increases, so is customer base, in accordance with rating and reputation. The buyer will prefer to choose those supplier whose rating is good in the market.
• Will ensure healthy competition and enhanced compliances: The objective of this concept of tax administration is to make people fully GST compliant and on time with the uploading of invoices and other necessary documents, which will ensure healthy competition in the market.
• Lower or poor rating may attract stricter scrutiny and surveillance: If rules and regulations are regularly followed, then the chances of business toning under the spotlight or scrutiny of the GST authorities are significantly reduced, as the need to audit accounts will be nil.

IMPACT OF COMPLIANCE RATING

• Correct and timely input tax credit
• Enhanced Trust and reputation amongst the business community
• Increase customer base of business entities
• Reduced costs due to better negotiation
• Chances of scrutiny / audits reduced
• Good Corporate Governance

Effect on buyers

Buyers will look for sellers with a higher rating which will ensure they can avail input tax credit faster and create minimal disputes with the department

Effect on sellers

Sellers with a higher rating will attract more customers yielding to high scales .

3 STEPS TO MAINTAIN GST COMPLIANCE

1. File your GSTR-1 and GSTR-2 on time
2. Pay your tax dues
3. Submit your annual return

The rating mechanism shall also serve as feedback to the stakeholders of the company like promoters, investors and directors on indicating the steps to improve the compliance. GST compliance ratings (gst.gov.in) are expected to bring a new culture of compliance which will not only ensure fullest and correct compliances but will also result in avoidance of tax evasion and lesser tax disputes and litigation.