New GST Supplier Rating Database Set to Transform Indian Business Landscape

Posted on    27 September 2023

The Indian government is working on the development of a database that will rank suppliers based on their Goods and Services Tax (GST) compliance track record, credit history, transaction and supply history, and any past defaults. This mechanism is expected to be introduced in the upcoming vote-on-account and implemented in the next financial year.

The purpose of this database is to provide businesses with information about the compliance of their vendors, allowing them to assess the risk associated with engaging in business with particular suppliers. The move aims to enhance compliance among small suppliers and prevent large businesses from facing challenges related to input tax credit due to defaults by their suppliers.


Here are some key points about this initiative

  • Rating Parameters: The rating of suppliers will be based on seven broad parameters, although the specific details are being worked out by the Central Board of Indirect Taxes & Customs (CBIC) in consultation with the industry.
  • Input Tax Credit: Currently, businesses cannot claim input tax credit if their supplier does not file returns or upload invoices on time, which can result in capital blockage. The rating system is intended to help businesses choose suppliers who are GST compliant.
  • Data Readiness: Data synchronization for this rating system started earlier, but it was delayed due to incomplete data. However, with mandatory e-invoicing for small businesses, ongoing geo-coding, and Aadhaar authentication, the CBIC is expected to have updated and complete supplier data by the end of October.
  • Implementation Timeline: The rating process is scheduled to start by November, and the government plans to formally introduce it in the budget. The intention is to implement the system from the next financial year.
  • No Legal Changes Required: The GST law already provides for compliance rating, so no changes in the law are required for this initiative.

The industry had been requesting a GST compliance rating system for vendors, but the lack of complete data synchronization had initially caused delays in its implementation. However, the government now seems to be making progress toward introducing this mechanism to improve transparency and compliance in the GST system.

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