The Goods and Services Tax, or GST, was implemented with a simple objective in mind – to reduce corruption and make tax and returns filing faster, more reliable, and cost-effective. But, as with any new system, there are always a few people who spend more time on finding out loopholes in the law rather than following it and making the country a beautiful place to live.
As you register for GST or conduct business with GST-registered suppliers, you may fall into the trap of an unscrupulous supplier without an inkling, who might dupe you in more than one way possible.
This article skims and scans the GST notification and makes you understand why checking a supplier’s tax payment history is important before you enter into any transaction involving money.
Who is a Supplier?
According to the GST Act, a supplier is any GST-registered business, which supplies services or goods. Anybody acting as an agent of a registered supplier, as is the case with eCommerce companies, is also a supplier.
What are the Various Types of Fraud that a Supplier May Commit?
A supplier may resort to any of the following hard to identify offenses.
- Issuing a fake GST invoice
- Not issuing a proper computer-generated invoice
- Issuing a GST invoice without supplying the services or goods
- Making use of a different person’s GSTIN while generating the invoice
- Submitting wrong information on the GST portal during registration
- Submitting fake returns
- Submitting GST returns within three months from the deduction date
- Claiming Input Tax Credit without receiving the services or goods
- Not disclosing actual sales numbers to avoid taxes
- Not deducting or collecting TDS/TCS as per applicable laws
- Now maintaining proper accounting ledgers as stipulated by law
As you can see, a supplier may resort to one or multiple financial crimes without your knowledge.
How Can You Stay Safe from an Unscrupulous Supplier?
GST is synonymous with convenience. By choosing the right supplier, you can realise the true potential of GST.
The best way to stay away from a dishonest supplier is to check the supplier’s tax payment history.
What Can Happen if You Do Not Check the Supplier’s Tax Payment History?
The GST Council, in its 9th October notification, stated that all Input Tax Credit claims filed by the buyer in GSTR-3B must match the invoice details filed by the supplier in GSTR-1. The supply details can be found in GSTR-2.
In a situation where the supplier does not deposit the GST on time or fails to upload details of the supply through GSTR-1, you may lose the benefits of ITC or may claim up to 20% of the unmatched amount.
However, you may claim the Input Tax Credit if your supplier pays the GST on time and uploads all details in GSTR-1 before the due date.
Thus, by not checking the tax payment history of the supplier, you could risk a large chunk of your money getting withheld.
What Should You Consider Before Choosing a Supplier?
To choose the best supplier, you must pay proper attention to the following four things.
Check the price breakup of any product or service. Ask any supplier offering lower than market rates on how they can offer such deep discounts without comprising on the profit.
- Quality of Goods or Services
Compare the supplier’s goods or services with a competitor’s goods or services and select what suits you the best.
- After-Sales Service
A quality supplier is one who remains available even after closing the sale. Talk to previous customers, if possible, and choose a supplier who provides quality after-sales service.
- Payment Terms
A quality supplier would always call a spade a spade. Clarify all doubts related to payment and provide your signature only when the payment terms are laid out transparently.
How to Check a Supplier’s Tax Payment History?
The GSTN portal makes it easy for a buyer to check the returns filing status of suppliers.
All you need to do is to spot the ‘Search Taxpayer’ menu and key-in the GSTIN of the supplier. On entering the GSTIN, various details like the supplier’s name, status, and jurisdiction office would be displayed on the screen. You can also see the previous ten returns filed by the supplier.
Knowing the supplier’s tax payment history can save you from falling into the trap of unscrupulous suppliers.
Now, that your concept of suppliers’ tax payment history is clear, brush up your knowledge about GST tracking.