What is GST Compliance Rating and How Does it Work?

GST which is the acronym for Goods and Service Tax is a detailed indirect tax system that has replaced different sorts of indirect taxes such as VAT, central excise duty, and service tax in India since it came into effect on 1st July 2017. GST Compliance sets a benchmark for this system. It has brought significant changes in the Indian tax system and only for the better.  

It helps maintain discipline among Indian citizens and businesses making them follow rules and regulations. In this article, you will find out everything about GST compliance. We will cover what compliance rating means and its benefits as well.

What is GST Compliance?

The Indian government after a lot of deliberation has finally set some standards for businesses. These standards are to be followed and consist of various guidelines prompting them to pay their taxes on time to ensure the smooth running of the economy.

So, what happens when you don’t follow these rules? When you are non-compliant with the GST regulation, businesses get disrupted which leads to legal consequences ultimately. This is why it is compulsory for businesses to adhere to these guidelines that are set by the government for their own good at the end of the day.

The thing with GST rules is that it keeps on changing with time and economic status. The three main categories of GST compliance that need the most of your attention are:

• Registration Compliance
• Tax Invoice Compliance
• Return Filling Compliance

The long-term advantage of maintaining a high GST compliance is that it builds trust with the government. Once you achieve that trust then nobody can stop you from expanding and bringing large-scale customers and clients onboard.

What is GST Compliance Rating and How Does it Work?

In layman's terms, GST compliance rating is related to the performance ranking of all registered taxable people. This rating tells you how compliant you are with respect to the GST rules and regulations.

This rating was introduced with the idea of making people fully GST-compliant. This involves activities like uploading your documents and invoices on time and several other activities. 

Now, the criteria for GST rating is yet to be determined. However, experts believe that the factors written below could play a major role in deciding whether a business is compliant or not:

• Filling of returns on time
• Payment of taxes on time
• On-time reconciliations
• Compliance with all other time limits that come under GST
• Cooperating with different GST authorities in India

Advantages of Being GST Compliant In India

Staying compliant with the GST rating system offers tons of great benefits if you own a business under GST in India. Let us have a look at some of them:

Less Scrutiny

A higher GST compliance rating means that your business follows all the GST rules laid out by the government. It is proof that you are regular in return filing, tax payments, and other activities.

This reduces your chance of being selected for Income tax raids and audits. You can use this valuable time and resources to expand your business.

Quick Refunds

Businesses with good compliance ratings enjoy a faster refund-claiming process. With this, your cash flow increases, and your waiting time for a refund gets minimized.

Smoother Input Tax Credit Availability

Businesses that have a good compliance rating have a great customer base. These customers are more likely to claim Input Tax Credit on purchases. This activity ensures a seamless flow of ITC through the economic supply chain.

More Business Opportunities

A business with a strong compliance rating has many more opportunities to expand its business. Moreover, it is entirely possible that government tenders and contracts give preference to businesses with a high compliance rating.

Are There Any Disadvantages to GST Compliance Rating?

Well, if you are a small business owner then yes, you may have faced the heat because of this rating. Small businesses usually do not have the funds to remain fully compliant in the initial days. This means that their rating will suffer giving an advantage to bigger players in the market and disrupting the entire supply chain.

Wrapping Up

This was my take on GST compliance, its benefits, and its disadvantages. It is a necessary tax imposed on the majority of goods and services. The rules and regulations related to GST keep on evolving which is why it is important to stay updated.