The first reaction most people usually have in the face of change is to resist. Change, whether big or small initially threatens the old methods/traditions, which is said to be the prime reason behind the initial resistance. Therefore, offering rewards or incentives can help ease people into the change. When GST was introduced it was initially met with resistance, like the VAT scheme which was introduced a few years ago. Hence, the GST compliance rating system was designed, so that businesses could seamlessly transit into the new system.
The theory of the compliance rating system is to rate businesses on how compliant they are with the GST rules, regulations and the time limits specified in such Act and Rules. As per Section 149 of the CGST act, a registered person shall be assigned a goods and service tax compliance rating score by the government based on his record of compliance with the provisions of the act. The compliance system is like a performance scale, which will be visible on the public domain, where you, as a business owner, would get a rating in the range of 1 to 10 depending on how compliant you are.
So, for example, if you file your returns on time or pay your taxes on time there is a greater probability that you will be rewarded with the higher rating as compared to those who are not compliant and punctual in following the rules, regulations and time limits.
With so many rules and regulations, it might be cumbersome to file returns, address reconciliations, make payments, etc. However, failure to do so will have an immediate effect, as every registered business owner will be issued a refund based on such rating.
The amount and speedy processing of your refund will depend on your rating. With our team of GST experts at H&R Block you can easily ensure your rating remains high so that you can take advantage of the benefits.
So, for example, if you have a GST compliance rating of 8, then you can get 80% as an instant provisional refund of your total refund and balance of 20% will be refunded after scrutiny while someone with a rating of 5 will only get 50% as an instant provisional refund. Additionally, by failing to be compliant and maintaining your rating, you will lose out on many other benefits.
To maintain your GST rating, ensure you file your monthly/quarterly returns on time, submit your annual returns on time, pay taxes on time and cooperate with the authorities when they require it.
Moreover, ensure the details filled in FormGSTR1 are correct, as any modification/rectifications will delay your returns processing, thereby affecting your GST rating, which could affect your bottom line directly.
In addition to speedy refunds, there are other benefits to being GST compliant and maintaining your high ratings:
The rating system, which is visible to every registered business in the public domain, can affect your business as negatively as it does positively. Just as a high rating attracts buyers to conduct business with you, having a low average rating will blacklist you and deter others from doing business with you. A blacklisted business entity is someone who has failed continuously to file their returns, or short reported the sales continuously.
The biggest drawback of the rating systems is that it forces businesses to be compliant if they want to maintain their score and not damage their reputation among the business community.
While initially, the compliance rating system may seem harsh, confusing and unforgiving, it will bring change to the current tax culture, which is greatly needed to lessen tax disputes/litigations and dissuade tax evasion and create a clear and transparent economy. With the help of our earlyGST tax experts at H&R Block, ensure your business stays GST compliant by filing all the appropriate forms and paying dues in a timely manner. Although these rules are not yet notified by the government, we hope that this Compliance Rating system will help business to be more compliant.