Compliance Rating and Blacklist with respect to GST

GST Registration is extremely important for businesses which would help them save money that was levied before 1st July 2017 in the form of indirect taxes like VAT (Value Added Tax) and service tax. Furthermore, it has to be understood that businesses have to be compliant with the rules prescribed by the GST council failing which businesses could be blacklisted if their compliance rating is low.

Introduction to Blacklisting

Blacklisting is an action by an authority or a group, that blacklists people, entities or countries to be staved off or distrusted as not being acceptable to those making the list. The repercussions of being in a blacklist can be discriminated against, censured or refused a service or employment.

The Concept of Compliance Rating and Blacklist with respect to GST

Compliance Rating is a new system which has been introduced under the Goods and Service Tax Act. However, compliance rating has not been implemented under the existing laws of India. The compliance rating is a score assigned to any person registered under GST registration. This score will be endowed upon to those on the basis of its record of compliance as per the provisions of the GST Act.

Irrespective of the nature of a business, size of the business or the business turnover, every taxable person/entity registered under the Goods and Service Tax would be assigned the GST Compliance Rating Score.

As per section 149 of the Central Goods and Services Tax Act, 2017, basis certain parameters prescribed by the Government of India, every person/entity shall be assigned a GST Compliance Score. This score would be updated on a periodic basis and the same would be intimated to a taxable person of which the score would also be displayed in public domain.

Calculation of the Compliance Rating

The following factors are the determinants basis which the compliance scores are given:

  1. GST Returns timely e-filing.
  2. Timely payment of Taxes.
  3. Outward and inward supplies transactions correctly matches.
  4. Transparent Reconciliations.
  5. Compliant and co-operation with the GST department.

Certain privileges are endowed to the taxable person with higher compliance rating as compared with the taxpayers with lower rating. Low rated taxpayers would invite enhanced surveillance and the chances for scrutiny assessment would increase. Those with low compliance or rating lower than the prescribed threshold would be blacklisted.

Blacklisting of dealers

Compliance ratings would be periodically updated and intimated to the taxable person which would also be displayed on the public domain. The following are the parameters basis Low Compliance Rating basis which the company will be blacklisted:

(1) Consistently default for 3 months in filing returns.

(2) Consistently failing to report on sales beyond prescribed limit for a period of 6 months.

(3) Consistently default for 3 months in ITC which has been reversed.

Businesses, entities or dealers would be able to find information about lesser compliant taxable person since the compliance ratings would be placed in the public domain. People would be able to find highly rated taxable person from the public domain and people would also be able to understand with whom should they not associate with while doing business since dealing with them could have them incur input credit on purchases.

Benefit of GST Compliance Rating

It would help business ascertain the most GST compliant dealers or venders for business. The GST Compliant entities/business would enjoy the following benefits:

(1) They will enjoy preference for doing business.

(2) There would be less chance of scrutiny and can enjoy trust of tax authorities.

(3) Would enjoy good reputation in the business environment.