News Update

Budget 2018 unlikely to be populist; PM drops hintsPetro Minister says he is trying hard to bring Petroleum under GSTPresident appoints Om Prakash Rawat as Chief Election Commissioner w.e.f Jan 23, 2018 + also appoints Ashok Lavasa as Election CommissionerGST - Supply of services upto Rs 5 lakh allowed under Composition SchemePresident of India exercises powers u/s 15(4) of NCTD Act, 1991 to notify disqualification of 20 AAP MLAs from Delhi AssemblyGST - CBEC Chairperson calls for expediting exports refundGovt launches Liveability Index Program in 116 citiesONGC to shell out Rs 37915 Cr for HPCLBudget 2018 - Printing of documents commences after Halwa CeremonyFM’s Davos trip cancelled as Budget preparations pick up last leg momentumONGC to pick up Govt’s 51% equity in HPCL for Rs 36900 CroreThe last date for filing GSTR-3B for Dec, 2017 extended by two days to Jan 22, 2018Major fire in firecracker & plastic factories in Delhi kill 17 workersVAT - ITC is a substantive right and it cannot be denied merely on basis of some machinery provisions or flimsy technical error or even on ground of limitation: HCTDS default - A few nights in Tihar?Aadhaar & GST glitches should trigger IT Infrastructure Protection ReviewData Protection Framework - Panel to hold public consultation on TuesdayCrypto row gains new ‘currency’; CBDT finds it cryptic; Notices issued to investorsExport of onions allowed on LC with M. E. P of USD 700 FOB per MT with immediate effect till 20.02.2018Silvassa tops List of winner Smart CitiesIndia welcomes IMF-WB Report on improving banking supervision by RBIGovt appoints Amardeep Singh Bhatia as Director of Serious Fraud Office till March, 2020Intl Customs Day: 20 persons, including 17 officers, to get WCO Certificate of MeritGST - Coffee beans processing units in trouble; seek exemptionGST Council also approves several amendments in CGST RulesGST Council grants mega relief to healthcare services & clarifies rates for many Services17 lakh Composition taxpayers paid only about Rs 307 Crore; Council expresses disappointment
Compliance Rating Score under GST - a new era of certification

JUNE 29, 2017

By Rajshree Lohia, Advocate, Taxpert Professionals

THE Goods and Services Tax ("GST") regime, introduces a fresh concept of compliance rating score to be attributed to taxpayers based on such parameters as may be prescribed which may be how punctual or accurate they are in filing their returns etc. The scheme has been newly introduced under the Central GST Act, 2017 (hereinafter referred as the "Act"), and did not find reference in the existing indirect tax system. Akin to the credit rating score provided by Credit Information Bureau (India) Limited ("CIBIL") indicating a borrower's credit worthiness, a compliance rating score would be issued to the taxpayers under the new indirect tax regime depicting how compliant they are in respect of paying their taxes and filing returns.

According to Section 149 of the Act, taxpayers registered under the regime would be assigned a rating, based on how promptly they upload invoices, pay taxes and file returns etc.The provision has mutatis mutandis applicability in the Integrated GST Act, 2017 as well as the Union Territories GST Act, 2017. Section 149 of the Act reads as follows,

"(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."

Such rating will be intimated to the taxpayer and made public on the GST Network (GSTN) website. It shall be periodically updated and help taxpayers make informed decisions while purchasing goods or services. Irrespective of the nature of its business, quantum of supply or turnover, every person registered under the Act will be assigned a GST compliance rating score based on his record of compliance.The provision reflects the idea of the tax authorities to build peer pressure amongst companies to ensure compliance.

The exact parameters for calculation of the said rating are still uncertain as they have not yetbeen notified by the Government. The Chief Executive of GSTN, in an interview, had stated that regularity in uploading the invoices, filing of returns and taxes would be the main criterion for assigning such rating. Other factors which would be considered are namely, matching of outward and inward supply transactions, transparency in reconciliations, co-operation with GST Department, amongst others. It can be rightly concluded that the sine qua non of such compliance rating is the proper filing of taxes and returns.

A compliant taxable person with a higher rating entitles itself to certain privileges, whereas on the flip side a lower rating may call for enhanced scrutiny. The probability for inspection and inquiry will ascend for suppliers with ratings lower than the prescribed limit.

Since,a considerable amount of the foundation of the GST regime is built on compliance, such rating shall have a huge significance in the decision making process while selecting suppliers for purchasing its inputs. A supplier not being compliant may also put its counter-part purchaser at a disadvantageous position, as the matching of returns would be disrupted leading to a delay in Input Tax Credit ("ITC"). For instance, a distributor procuring goods from a supplier would not be able to claim ITC for the taxes paid until the said supplier files the requisite invoices and the claims of the distributor and supplier are matched.

In the situation of having an option to purchase from multiple suppliers offering the same price, the availability of such score, helps the company to opt for the supplier having a better rating. A high GST compliance rating may affirm to the purchasers that the ITC for the purchases made could be promptly claimed and realized, as their suppliers are compliant.

The present scheme has been introduced to incentivize suppliers to regularly discharge their responsibilities under the provisions of the new regime. A higher rated supplier would enjoy the trust not only of the persons it is dealing with but also of tax authorities andthere would be lesser need of surveillance of its practices. The credit claims of the company will smoothly flow. Also, such rating would enhance the reputation of the company, adding to the good governance facets of organization.

With the introduction of this new concept, the tax authorities present the importance of compliance in this new indirect tax regime. The provision is not only important for the supplier but also acquaints companies dealing with such suppliers, making them alert on whom to deal with.

Though the present stage is quite nascent to evaluate the real impact of this provision in everyday business activities, it is anticipated to bring about a new culture of compliance.This would not only guarantee prompt and accurate compliance but also ensure greater transparency and prevent tax avoidance and evasion.

GST Rollout - Are We Ready? - Episode 2 (Concluded)

GST Roll-Out - Are we ready? - Episode 1

GST Rollout | Episode 2 | simply inTAXicating

GST Rollout | simply inTAXicating

Also See : TIOL TUBE Videos on GST


(DISCLAIMER : The views expressed are strictly of the author and doesn't necessarily subscribe to the same. Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)