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What is GST Compliance Rating?


What is GST Compliance Rating?
GST Compliance Rating
September 26, 2022


‘GST Compliance Rating’ is a score given to businesses based on their overall compliance with GST – based on timely GST returns, timely payment of taxes, compliance with other rules and regulations under GST etc. This KPI is like a business performance parameter, and most importantly, it will be made visible in the public domain by the government in the near future.

Why is Compliance Rating important? 
Keeping in mind the fact that the compliance rating of every business will be available in the public domain, businesses will prefer to trade with other businesses having a high rating. The fact that businesses will not prefer to trade with businesses having a low compliance rating — is not confusing. Why would a taxpayer deal with a taxpayer who is not filing his returns on time, not paying his due taxes — who is not GST compliant. Businesses that continue to fare poorly will also be blacklisted and will find it extremely difficult to gain the trust of Government and other businesses. It might be an important factor in raising debt or equity investments in your business.


Advantages of a High GST Compliance Rating: 

1. More Business Opportunities
High GST Compliance Rating will actively attract other businesses towards you, just as a low rating will discourage fellow taxpayers from trading with you. This is not exactly rocket science — if a business is comparing two other businesses that are offering goods at the same price, but they have different compliance ratings, then the business will opt for the one that has a better compliance rating. Traders will find it undesirable to do business with someone who may cause problems with the Input Tax Credit cycle, thus costing them money.


2. Quick Distribution of Input Tax Credit & Refunds 
If you have a high compliance rating, then Input Tax Credit (ITC) will be issued to you quickly. Also, as refund claims will be processed on a merit basis, businesses with a high compliance rating can expect their refund claims to be dealt with quickly. Thus, the treatment you receive from the GST authorities will be in accordance with your GST compliance rating.


3. Less Interference from Administration 
Needless to say, GST compliance rating of businesses will affect their chances of audit or scrutiny from the Government. A high compliance rating will likely indicate to the Government that there is no requirement of taking a close look at the account books of a business — that things are in the correct order. Adversely, a low rating could be an indication of compliance problems that will essentially justify an audit, something that will drain extra resources of the affected taxpayer.


4. Trust and Reputation in the Business Community 
Every registered business’ GST compliance rating will be available for perusal in the public domain. If the compliance rating is high, it gives a strong message to the business community that the particular business is trustworthy and that doing business with them will not turn out to be a mistake. 
The system of GST Compliance Rating has the potential to make or break your game. During the initial period, the GST Compliance Rating mechanism may seem to be strict and a little difficult to understand, it will inevitably herald a much-needed reformation in the Indian tax culture and assist in creating a more transparent economy.


To understand how our GST Compliance Solution will help you achieve the perfect GST Compliance Rating, contact us.