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Taxpayers to be rated on GST compliance

Taxpayers registered under the new goods and services tax (GST) regime that is set to be implemented from 1 July will be assigned a rating, based on how promptly they upload invoices, pay taxes and file returns.

The ratings will be made public on the GST Network (GSTN) website as tax authorities seek to build peer pressure among companies to ensure compliance.

The rules that govern the new indirect tax regime require the matching of invoices for claiming input tax credit. For example, a manufacturer procuring goods from a supplier will not be able to claim credit for the tax paid until the seller uploads the invoices and the claims of the manufacturer and supplier are matched.

This means that in case two suppliers offer the same price to the manufacturer, the company may opt for the one that has a better compliance rating.

“Input tax credit is crucial for working capital of firms,” said Archit Gupta, chief executive officer of, which has ventured into helping firms file their tax returns under GST. “So if two vendors are offering similar prices to a manufacturer, the latter will opt for the firm that uploads its invoices and files returns on time and hence has a better rating.”

For this reason, many big manufacturers, especially in the automobile and consumer goods industries, are working with their suppliers to train them for the transition to the GST regime.

GST, a destination-based tax, is one of the most ambitious tax reforms that India has undertaken. It will subsume a host of indirect taxes being levied by the central and the state governments, including excise duty, service tax, value-added tax, entertainment tax, luxury tax and entry tax. Under GST, the entire system of tax return filing, invoice uploading and tax payment will be online through the GSTN—the information technology backbone of GST.

“Regularity in uploading the invoices, filing of returns and taxes will be the main criterion for rating the taxpayers. The ratings will be updated at periodic intervals and also will be put up in the public domain,” said Prakash Kumar, chief executive of GSTN.

GSTN is preparing to handle more than 3 billion invoices a month from an estimated 8 million taxpayers.

The central GST bill that received Parliament’s approval last week also has a provision to facilitate the ratings. “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,” it says, adding that the parameters will be prescribed.

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