CONCEPT OF COMPLIANCE RATING UNDER GST

[Dr. Sanjiv Agarwal]

Section 116 of the model GST law provides for ‘GST Compliance Rating’ which is a new concept in India. Presently, there is no system of compliance rating under any tax law in India. GST compliance rating is a new concept.

Accordingly, every taxable person shall be assigned a GST compliance rating score based on his record of compliance with the provisions of the GST Act. Every taxable person irrespective of its nature or size or turnover shall be assigned a GST compliance rating.

The GST compliance rating score shall be determined on the basis of parameters to be prescribed in this behalf. Compliance rating scores could be based on promptness of paying taxes, timely e-filing of returns, matching of transactions, transparent reconciliations, adherence to various time limits, cooperation in dealing with tax department etc.

In terms of sub-section (3) of section 116 of the model GST law, the GST compliance rating score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain in the manner prescribed. The parameters and criteria as well as methodology shall be prescribed by way of rules.

It is expected that GST compliance rating scores may be used for identifying compliant tax payers which may get better administrative treatment or response, ascertaining risk profile of tax payers, data integrity / audit of tax payers records, selection of cases for audit or scrutiny etc. A taxable person with higher rating may be given certain privileges while a lower rating may invite enhanced surveillance. This may also instill healthy competition amongst tax payers for attaining a higher rating leading to enhanced reputation and as an indicator of good governance.

Since GST shall operate on electronic platform, GSTN may be entrusted with the responsibility of determining rating scores based on parameters, its periodic updating and publication of rating in public domain.         

Since the compliance ratings would be placed in public domain, businesses or dealers would be able to take informed decision to deal with the lesser complaint taxable person. A highly rated taxable person would be preferred over others. It would also add to efficiency of transactions, timely input tax credit and lessee hurdles in reconciliations. It would also add to organization’s reputation large organization including PSU’s may prefer to deal with better rated suppliers / vendors.