Why is GST Compliance Rating Important for Businesses

1. Why is GST Compliance Rating Important for Businesses A GST compliance rating is a government-assigned rating for a business. This score is publicly available for the benefit of other businesses to see how a business is complying with tax regulations. This score helps other businesses decide whether they want to engage in a business relationship with a particular company. The GST compliance rate is calculated based on various factors such as the timing of monthly and annual returns, giving details of input credits used, tax paid, etc. Why do businesses need to stay GST compliant and receive a high rating? According to the GST rules, if consumers want to take credit for the goods they buy, they have to list all the transactions in which they have paid GST from their sellers. Under the GST system, businesses have the option of claiming input tax credit, which is essentially a offset of tax paid on input against tax collected on the sale of goods and services. However, these input credits can be availed if all the suppliers from whom the goods are purchased as inputs have recorded these transactions properly in the GST Portal. This often leads to important contracts, and it is good to use GST accounting software for this, so that you can analyze the discrepancies between the declarations of your suppliers and the purchase data that you have entered in the accounting software. Let's imagine the best scenario where a buyer buys goods from Supplier B and uploads all the transactions in GSTR-1. From now on, all transactions from GSTR-2 filed by the buyer will be automatically populated using GSTR-1 filed by the seller. A buyer can avail input tax credit using GSTR-2.

2. Now consider what would happen if seller B defaulted. In this case, the GST Department will not consider his tax return to be valid (as per Article 27(3)). This will mean that the buyer will not be able to prepare their GSTR-2 and hence, they will not be able to claim input tax credit. If the same seller supplies goods to 100 buyers, then none of the buyers will be able to claim their input tax credit because of who selling not paying their valuation. The example above is simple, and clearly shows that it only takes one illegal company to affect everyone else who does business with that company. However, by checking the company's GST compliance status, buyers will be able to find suppliers with the best track record of paying their bills on time, and they can choose a supplier. agreeing in time so that they do not have. suffer the consequences of the seller's negligence later. The higher the seller's compliance score, the better the buyer's chances of getting input tax credits. Benefits of a good GST Compliance Rating Gaining the trust of customers and suppliers is essential to the survival and success of any business. When your business has a better credit score, not only will you have a better chance of gaining the trust of the government, but you can also gain the trust of customers you may do business with in the future. This may seem trivial compared to building your business plan, marketing plan, and all the other great things where the impact can be quantifiable and direct, but consider the impact on trust. You must strive, one way or another, to earn the trust of your customers. Having a good GST compliance degree is another way to achieve it. On the other hand, you may be selling the best products or providing the best services, but a negative GST rating will affect your customers' ability to get the tax benefits they deserve. This will have an impact on their business relationship with you, regardless of the quality of your products and services.