GST compliance rating score and how to improve your GST rating score

Last udpated: Nov. 4, 2017, 9:12 p.m.

Every registered person under GST is given a compliance rating. This rating number depends on timely tax payment, timely and accurate return filing and fulfilling other requirements. Section 149 of CGST act, specifies that

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.

This score is made available to public for checking the compliance health of registered person. You should not only take care of your business but also take care of your ratings, as in long run your GST ratings will be the first publicly available impression about your business.

GST compliance rating score

What is compliance rating score under GST?

If you ever took a loan or are familiar with banking credit score, this is similar to that. A credit score in banking system indicates credibility of a person, similarly under GST compliance rating will indicate the trustworthiness of a registered tax person.

GSTN which built entire GST IT infrastructure has prepared this rating system and every tax person will be rated based on his complying with GST Law.

What a full compliance rating score indicates and how often ratings change?

Initially every registered person will have the full rating. Ratings will change from time to time depending on defaults made by registered tax person.

After registration under GST, a full rating will be given.

A full rating may indicates that

Even registered person who has opted composition levy will be rated.

Whether you should trade with a person with low GST compliance rating?

You should follow banks. Banks do not provide credit facilities to people with low credit score, or increase their scrutiny. Similarly you should either completely stop trading with such person or investigate the reasons for low ratings.

If person is regular defaulter then you should completely avoid trading with him. Otherwise you may face consequences such as non availability of credit due to non filing of details of outward supplies.

The purpose of this compliance rating is to provide information to public about worthiness of registered person.

How to improve GST compliance rating if you have low rating?

Having a good GST rating is as important as having a good product. Even if you have the best product with best MRP, market may not be interested in dealing with you.

You may find your sales going down and market sentiments turned negative all of a sudden. This could be because of decrease in your GST compliance rating.

Almost every big company including MNCs  avoid dealings with bad reputed companies. To avoid any damage to your business it very important that you maintain a high rating.

If you lost your ratings or your ratings just got decreased, you should work on improving your ratings.

To improve your ratings first step should be investigate the reasons for downgrading. The possible reasons could be:

  • You have not file your returns and other information on time, or
  • You have not made timely tax payments or you have made short tax payments, or
  • You have wrongly taken or utilised your input tax credit, or
  • Mismatch in sales or purchase (inward and outward supplies) uploaded on GSTN portal, or
  • You have not maintained proper records required under GST law, or
  • due to any other non-compliance

After finding the reason for downgrading of ratings, you should start working to improve your rating.

To start first correct the mistakes already done. If you have missed any return filing, file the returns. If there is any mismatch in details provided regarding outward and inward supplies talk to your customers and vendors to correct the information returns.

Prepare and keep all documents required under GST.

If you are dealing with a non-registered person, make sure you are complying with all requirements. I personally recommend to check that rating of all your vendors and customers is in good health. Non-compliance or providing wrong information by them can also have an impact on your ratings.

For example, if your customer wrongly books a purchase on your name and provide this in his inward supplies return. You have the chance to reject this within 10 days but if you do not reject this wrong information then it may have negative impact on your rating.

Posted by Pulkit Sharma under GST

A Chartered Accountant by qualification. Love to code and share knowledge. On a mission to create the largest knowledge library for finance and taxation professionals. Check Profile

1 Comment

Comment by GST Payer

Compliance rating is not activated yet. May be GSTN needs more time to implement it. Hopefully after 3 years it may start in line with current delays.

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