The introduction of the new GST framework has brought significant duty charges in India. The new system brings together various indirect taxes such as VAT, CST, central excise duty, etc. This system was much needed as it has increased transparency and eased administrative paperwork. This new system is most beneficial for small and medium-sized businesses as they rely on technology for registration and tax filing tasks online.

GST has got many new concepts like mixed and composite supply, time of supply, and most importantly GST compliance rating.

GST compliance

The GST compliance rating refers to a score determined by the Goods and services tax department for every person registered under GST based on various parameters such as filing monthly and annual returns, tax paid input credit claims, etc. It is used to determine how compliant a business is with the GST regulations.

The compliance rating has a wider impact affecting all things from your tax returns to partnering with suppliers and wholesalers. The main motto behind the introduction of compliance rating is to encourage taxpayers to file returns on time and remain compliant with GST guidelines. This helps small businesses choose the most compliant vendor for making deals.

The GST compliance rating score ranges from zero to ten, with zero being the worst and 10 being the best. According to the government, the GST authorities will assign a score to everyone registered under GST. There are multiple factors based on which rating is given. Let’s discuss the factors next.

Factors affecting compliance rating

The following factors relating to GST that would impact GST rating are

  • Filing GST returns timely
  • Making tax payments, penalties, and other dues on time
  • Cooperating with the GST authorities
  • Fixing errors while filing returns
  • Reconciliation on time

Filing GST returns timely

After getting registered under GST, you need to file the returns correctly on time. Timely filing your returns will not only improve your rating score but also will help you to avail yourself of input tax credit claims. In addition, delayed filing of returns also results in a delayed claim of ITC.

Making tax payments, penalties, and other dues on time

Timely pay all the taxes and other dues you are liable for. In case of a delayed payment of tax and penalties will impact your compliance score. This will reflect your inefficiency in complying with the GST regulations and also impact your image of the business.

Cooperating with the GST authorities

Whenever the tax authorities are visiting your business place for verification of physical address, interact with them and give all the clarifications sought by the tax authorities. Your cooperation with the officials with utmost importance will improve your ratings.

Fixing errors while filing returns

As the GST system is completely online and it is expected that ratings will be generated automatically. Hence, staying updated with the taxes can improve ratings. Even a single return filed late can impact your score and sometimes there are issues with GST portals in that case your rating won’t be affected.

As a small business holder filing returns timely and correcting the errors in it will help you to maintain a high score that improves your tax status and valuable business partnerships.

Reconciliation on time

It is important for your business to file suppliers and your GSTR-3B and GZSTR-1 returns correctly. The transaction details of both the forms should match else the forms will not be reconciled correctly and it will lead to a delay in filing returns.

What benefits can you get from a good GST compliance score?

  • Being compliant with GST rules and maintaining a higher rating score will reduce the chances of scrutiny checks of your business. Maintaining a higher rating will boost your company’s image while on the other hand low rating will lead to the frequent visits of GST authorities for audit and it will impact your company’s image negatively.
  • Maintaining a higher rating score will result in speedy credit of refund claims and will also boost your company’s image among your clients and suppliers.
  • Mainly people trust a business that is compliant with rules and guidelines. This will give you a better advantage over other businesses in the same field.

As GST compliance can affect your business in multiple ways it is important to file the GST returns and tax payments timely using the taxpotter software.

How businesses will benefit by becoming GST compliant?

The best way to understand this is with an example

Let’s assume Sahil owns a construction company and he requires some machinery for his company. He did some research and found 2 sellers ABC and XYZ. After taking suggestions from his business friend he found that ABC has a good compliance rating i.e 8 while XYZ has a rating of 2.

XYZ doesn’t file timely returns resulting in blocking input credit while ABC follows all rules and regulations and is highly compliant. so, Sahil placed the order with ABC company.

  • Buyers will always look for sellers with a higher rating so that they can avail input credit faster.
  • Sellers having higher rating scores will attract more customers and it improves their business image.

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

Where can I find the compliance rating of any business?

GST compliance rating score for all persons registered under GST is updated periodically and is made available in the public domain. Hence, it can be readily accessed by all registered and unregistered persons.


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