Tax compliance is mandatory for businesses operating under India’s Goods and Services Tax (GST) framework, which has revolutionized indirect taxation, promoting transparency. With the advent of GST businesses now face assessments through the GST Compliance Rating (GCR) to measure their adherence to GST regulations. Improving this rating involves using efficient GST software or GST billing software. The GCR matters as it shows a business’s dedication to following GST rules, affecting credibility, access to finances, and relationships with stakeholders.
What is GST Compliance Rating?
The GST Compliance Rating serves as an indicator of a business’s adherence to GST filing regulations. Irrespective of their size or nature, all taxable entities undergo assessment through this rating system.
This rating structure is like a performance evaluation, typically ranging from 1 to 10, where 1 signifies minimal compliance, while 10 denotes the highest level of adherence.
What is a GST Compliance Score?
A company’s commitment to filing returns shapes its GST Return Compliance (GRC) Score. This score, observed over the past year, comprises two critical elements: GRC score for GSTR-1 and GRC score for GSTR-3B. The promptness in filing GST returns determines these ratings. Various key factors are taken into account to assess the GST compliance score, each playing a significant role in defining the overall evaluation;
Timely Return Filing: The punctuality in submitting returns is the foremost consideration in evaluating the GRC Score. A higher GRC Score indicates a greater likelihood of meeting filing deadlines. Timely filing reflects a company’s dedication to compliance and operational efficiency. Using efficient GST billing software not only assists in compiling data promptly but also enables businesses to meet the filing timelines.
Accuracy in Returns: Another crucial aspect impacting the GRC Score is the precision in filed returns. Companies with higher GRC Scores are more inclined to submit accurate returns. This accuracy demonstrates a company’s attention to detail, reducing discrepancies and showcasing a solid grasp and implementation of GST regulations. To enhance return accuracy businesses use advanced GST software that guarantees precise calculations and record-keeping.
Compliance with GST Rules: Adherence to GST rules and regulations forms the core of a company’s alignment with the GST framework. A higher GRC Score signifies a better likelihood of complying with these guidelines. Maintaining a high GRC Score indicates a company’s commitment to following GST norms, building trust and reliability in their operations. Using GST software helps in staying updated with evolving regulations and maintaining higher GRC Score.
Why is maintaining a high GST Compliance Score important?
Ensuring a high GST Compliance Score holds significant importance for businesses navigating the complexities of regulatory adherence. This score, publicly accessible on the GST portal, can profoundly influence how companies and suppliers engage with a business. Here is why maintaining a high GST Compliance Score is so important;
Reduced Audit Likelihood: Maintaining a higher compliance score substantially diminishes the probability of facing in-depth scrutiny through a GST official’s audit. A good compliance score signals a business’s commitment to adhering to GST regulations, thereby reducing the chances of stringent audits.
Demonstrating Legal Adherence: A superior grade in compliance signifies a business’s consistent operations in alignment with all relevant laws and standards. Sustaining a high score over time solidifies this demonstration of legal adherence, fostering trust among stakeholders and portraying the company in a positive light.
Mitigating Audit Implications: Conversely, a low compliance rating triggers frequent audits, intensifying the presence of GST authorities within the organization. Such increased scrutiny can have adverse effects on the business, hence emphasizing the importance of maintaining a high compliance score to avoid such implications.
Accelerated Refund Processing: A high GST compliance score contributes to establishing a positive image within the GST ecosystem. This not only facilitates expedited processing of refund claims but also streamlines administrative processes and enhances operational efficiency for the business.
Reflecting Operational Excellence: A superior rating also mirrors the stability and excellence of a company’s operations. This leaves a favorable impression on both customers and suppliers. A higher GST rating also enhances the company’s credibility, thereby strengthening enduring relationships within the business landscape.
Building Trust and Business Success: Companies adhering to regulations tend to gain trust and credibility within the market. This trustworthiness translates into enhanced business success as stakeholders are more inclined to engage with compliant entities, nurturing long-term business growth.
Competitive Advantage: A higher compliance score opens up additional opportunities for businesses, as every taxpayer can access an entity’s compliance rating. This advantage can significantly differentiate the business within its sector and may provide the company a competitive edge over others operating in the same domain.
How will you know your GST Compliance Rating?
The GST compliance score undergoes periodic updates, accessible to both taxpayers and the general public. Every registered business is allotted a unique Goods and Service Tax Identification Number (GSTIN) that can be used for monitoring their compliance rating. Once these ratings are published on the GST Network (GSTN), businesses can use their GSTIN to ascertain their compliance rating effortlessly. To check your GST compliance rating, follow these steps;
Step 1: Timely Submission of GSTR-1 and GSTR-2
Reporting all sales and purchases is crucial on GSTR-1 and GSTR-2. Filing GSTR-1 by the 10th and GSTR-2 by the 15th of the following month is imperative. Ensuring no delays in these filings significantly contributes to maintaining a favorable compliance rating. Utilizing reliable GST billing software aids in prompt data compilation for these filings.
Step 2: Clear Outstanding Tax Dues
Businesses must settle any pending tax liabilities from the previous tax period before filing returns for the subsequent period. Section 27(3) of the GST statute states that a return submitted with unsettled tax obligations renders the subsequent return ineligible. Prompt tax payment is essential to maintain a favorable compliance score.
Step 3: Submission of Yearly Tax Return (GSTR-9)
In addition to the monthly GSTR-1 and GSTR-2 filings, businesses should ensure the timely submission of GSTR-9, the combined annual return. Filing GSTR-9 within the stipulated time frame is crucial for preserving a high GST compliance score.
How businesses can improve their GST Compliance rating
Improving a business’s GST Compliance Rating involves strategic measures aimed at fortifying compliance protocols. Employing a structured governance framework entails establishing explicit policies, procedures, and a strong system for monitoring and enforcing compliance. Below are some strategies that can help businesses improve their GST Compliance rating;
- Solid Governance Framework: Setting up well-defined policies, procedures, and a strong monitoring system lays the foundation for a strong governance framework. Establishing a culture where compliance is prioritized and consistently reinforced across all operational tiers contributes significantly to improving the compliance rating.
- Investment in Training: Ensuring training for all employees regarding company policies, practices, and relevant laws is crucial. Adequate training programs help in cultivating a workforce that is well-informed and committed to upholding compliance standards, thereby minimizing errors and discrepancies.
- Technological Integration: Using technological advancements helps in enhancing compliance measures. Investing in GST billing software or GST softwaresolutions streamlines compliance-related tasks, automates processes, and bolsters the overall Governance, Risk, and Compliance (GRC) posture of the business.
- Regular Audits: Conducting routine audits is imperative to identify and rectify any compliance gaps. Regular audits help in proactively addressing potential issues before they escalate.
- Swift Response to Findings: Addressing any compliance issues promptly and effectively is essential. Quick resolution of identified compliance deficiencies demonstrates the company’s commitment to rectifying errors and upholding regulatory standards.
- Proactive Approach: Taking a proactive stance in identifying and resolving compliance issues before they are highlighted by auditors or regulators is crucial. Being vigilant and addressing potential compliance gaps promptly ensures a more resilient compliance structure.
Conclusion
The GST Compliance Rating stands as a crucial metric in today’s business world, especially under the GST rules. It shows how well a company follows GST laws and also tells clients, suppliers, and banks how trustworthy and reliable the company is.
While navigating this system can present challenges, especially for small businesses. But it naturally encourages transparency and adherence. To optimize their GST Compliance Score, businesses must set up strong rules, use technology like GST billing software, and cultivate a compliance-driven environment. Taking these steps not only mitigates regulatory risks but also boosts the company’s reputation and helps it cultivate sustainable growth in the long run.
