Tax & Accounting Blog

India proposes a rating system for merchants in GST

Indirect Tax, ONESOURCE, VAT Tax Rates, VAT-GST Management November 2, 2015

India continues to work on implementing the GST and the Department of Revenue released three reports on the GST relating to how certain business processes should work in the GST.

1. Report of the Joint Committee on Business Processes for GST on Refund Process

2. Report of the Joint Committee on Business Process for GST on Registration

3. Report of the Joint Committee on Business Process for GST Payment Process

An interesting proposal was found in Annex X of the Joint Committee on Business Process for GST On GST Registration which was a rating system for dealers. The impact of a bad rating would be a purchaser would not be able to claim an input tax credit (ITC) until the supplier had actually paid the output. Once the dealer’s rating has been fixed, then the purchaser can return to claiming ITCs based on self-assessment.

The proposal would look at certain thresholds in order to determine if a supplier should be blacklisted.

A purchaser would know if their seller had a bad rating or blacklisted through an automatic text and also be not permitted to upload the blacklisted GST Identification Numbers into purchase details.

This a system which encourages the purchasers to select dealers who are in compliance with the rating system to speed up their input tax recovery.