By MS Mani
When a person is driving a car and is in traffic, what does the speed of their car depend on? The traffic ahead of them or the immediate car in front of them?
The above example is illustrative of GST wherein the cars behind you in traffic are like vendors to your business and the cars ahead of you are like your clients.
Similarly, if the person is surrounded in a sea of traffic, can they move without all the cars around them moving? That is exactly the GST ecosystem and the way traffic on the roads move is similar to how things will move on the GSTN portal. For each of us, our ability to do anything depends on our customers on the front and on the vendors at the rear.
If a vendor at the backend is not prompt in whatever he or she does, whether it is uploading the data on time, taking a registration in time, ensuring that the registration depicts the correct value on the invoice and dispatches the goods that are mentioned in the terms of the classification – this will have a material impact on us. Anything that our vendor did until now did not affect us directly.
However, we can always say that anything that a car behind us does now may affect us and, therefore, when we drive, we will need to keep an eye on our rear view mirror. Every act that our vendor does has the ability to create a financial loss for us.
One may lose the tax credit if our vendor has not complied. On the other hand, every time one deals with good vendors and people who take registrations, upload returns in time, and go ahead and take all the precautions necessary to undertake, the benefit will invariably go to us.
Similarly if one is not GST compliant, it will affect the car in front of us – your customer.
In the post GST world, if one becomes a non-compliant vendor, will our customer deal with us? Except one or two businesses where we may still have a slightly monopolistic situation, in majority of businesses there are many suppliers and few buyers who typically dictate terms. At that stage, our ability to be compliant and do all the things correctly is actually a life saver.
When we think of taking registrations and ensuring that the returns are loaded in time, this is akin to wearing a seatbelt in the car that protects us. In certain cars there are airbags. Now those airbags in a GST system are referred to as compliance ratings.
Every time we deal with a vendor, we check the vendor’s compliance ratings because if the vendor’s compliance rating is not good, we may suffer. So when we deal with any vendor in GST, we start by checking the vendor’s compliance rating on a scale of 1 to 10.
The writer is Senior Director and Partner, Deloitte India.