Section 149 of the Central Goods and Services Tax Act, 2017 deals with the concept of Goods and Services Tax compliance rating. The provision allows the Government to assign a compliance rating score to a registered person based on the person’s record of compliance with the GST law.
The basic purpose of this provision is to create a mechanism through which GST compliance can be assessed and, subject to the prescribed framework, communicated to the registered person and potentially made available in the public domain.
Section 149 contains only three sub-sections. It provides the legal framework for a compliance rating system, while leaving the parameters, periodic updating and manner of communication or publication to be prescribed.
What Is Section 149 of the CGST Act?
Section 149 is titled “Goods and services tax compliance rating.”
The provision states that every registered person may be assigned a GST compliance rating score by the Government based on the person’s record of compliance with the provisions of the CGST Act.
The score may be determined using parameters prescribed under the GST framework. It may also be updated periodically and communicated to the registered person and placed in the public domain in the prescribed manner.
In simple terms, Section 149 creates a statutory framework for evaluating GST compliance based on a registered person’s compliance record.
Main Objectives of Section 149
The compliance-rating concept can be understood as a mechanism intended to improve transparency and encourage better GST compliance.
A compliance-based system can potentially help in areas such as:
- timely filing of GST returns;
- proper payment of tax;
- compliance with GST procedures;
- identification of compliance patterns;
- improving transparency between businesses;
- helping registered persons assess the compliance profile of suppliers; and
- encouraging businesses to maintain consistent GST compliance.
The GST Council has discussed the concept in the context of enabling registered persons to obtain basic information about suppliers and helping them identify potentially non-compliant suppliers.
However, it is important to distinguish the statutory provision in Section 149 from proposals or mechanisms discussed by the GST Council at different points in time.
Section 149(1) – Assignment of Compliance Rating Score
Section 149(1) provides that:
Every registered person may be assigned a goods and services tax compliance rating score by the Government based on his record of compliance with the provisions of this Act.
The important elements of this provision are:
- the person must be a registered person;
- the Government may assign a compliance rating score;
- the score is based on the person’s compliance record; and
- the provision uses the word “may”, meaning Section 149 establishes an enabling framework rather than stating that every registered person must necessarily receive a rating at all times.
Who Can Receive a GST Compliance Rating?
Section 149(1) refers to every registered person.
Therefore, the provision is directed toward persons registered under the GST framework.
A registered person could include different types of GST taxpayers, depending on their registration and applicable GST provisions.
The section itself does not prescribe different rating categories for:
- manufacturers;
- traders;
- service providers;
- composition taxpayers; or
- other categories of registered persons.
Instead, Section 149 leaves the determination of the rating parameters to the prescribed framework.
What Is the Basis of the Compliance Rating?
Section 149(1) states that the rating is based on the registered person’s record of compliance with the provisions of the Act.
This means that the underlying concept is not simply the amount of tax paid by a taxpayer.
GST compliance involves multiple statutory obligations.
Depending on the prescribed parameters, a compliance assessment could potentially consider matters such as:
- return filing;
- payment of tax;
- compliance with prescribed procedures;
- accuracy and timeliness of required filings;
- compliance with other GST obligations; and
- other parameters prescribed under the law.
However, Section 149 itself does not list a detailed scoring formula. The section expressly provides that the parameters may be prescribed.
Section 149(2) – Parameters for Compliance Rating
Section 149(2) provides that the GST compliance rating score may be determined on the basis of such parameters as may be prescribed.
This is an important feature of the section.
The Act creates the authority for a compliance rating, but the detailed parameters are not written directly into Section 149.
Instead, the Government can prescribe the parameters under the GST legal framework.
Therefore, Section 149 should not be interpreted as establishing a fixed numerical formula directly in the Act.
What Could Compliance Parameters Include?
The exact parameters depend on what is prescribed under the GST framework.
The GST Council has, in its discussions on the proposed “Know Your Supplier” facility, considered information and compliance-related parameters such as:
- month and year of GST registration;
- whether the supplier is a composition dealer or normal taxpayer;
- turnover slabs;
- percentage of tax liability discharged through cash;
- details of returns furnished;
- e-way bill blocking history;
- certain return-filing defaults; and
- other information that could help a registered person understand the compliance profile of a supplier.
These were discussed by the GST Council as part of the proposed Know Your Supplier framework and should not be treated as a statutory scoring formula contained in Section 149 itself.
Compliance Rating and “Know Your Supplier”
Section 149 has been discussed by the GST Council in connection with the Know Your Supplier concept.
The basic idea was to enable a registered person to obtain relevant information about a supplier with whom the person proposes to conduct business.
The GST Council noted that recipients could benefit from having basic information about suppliers, particularly because the compliance of suppliers can affect recipients in areas such as input tax credit.
The proposed framework discussed displaying certain information relating to a GSTIN so that registered persons could make more informed commercial decisions.
This demonstrates one potential practical purpose behind the compliance-rating framework: greater visibility into GST compliance information relating to businesses.
Section 149(3) – Updating the Compliance Rating
Section 149(3) provides that the GST compliance rating score:
- may be updated at periodic intervals;
- may be intimated to the registered person; and
- may also be placed in the public domain.
The manner of updating, communication and publication is to be prescribed.
Therefore, the provision contemplates that compliance information need not remain permanently fixed.
If a taxpayer’s compliance record changes, a rating or compliance profile could potentially be updated under the prescribed mechanism.
Why Periodic Updating Is Important
GST compliance is an ongoing process.
For example, a registered person may:
- file returns late during one period;
- subsequently regularise the filings;
- pay outstanding tax;
- comply with later filing requirements; and
- maintain timely compliance thereafter.
A system based on a compliance record may therefore need periodic updating rather than relying permanently on historical information.
Section 149(3) specifically provides for periodic updating of the compliance rating.
Communication to the Registered Person
Section 149(3) also provides for the rating score to be intimated to the registered person in the prescribed manner.
This is significant because a taxpayer should be able to know the compliance rating assigned under the statutory mechanism where such a rating is operationally assigned.
The provision does not itself prescribe the exact communication method.
The manner of communication is to be prescribed.
Publication in the Public Domain
Section 149(3) further provides that the compliance rating score may be placed in the public domain in the prescribed manner.
This is one of the more significant aspects of the provision.
If implemented through the prescribed framework, publication could allow other persons to obtain information regarding the compliance profile of a registered person.
The provision therefore has a potential transparency function in addition to its internal compliance function.
Is GST Compliance Rating the Same as GST Registration?
No.
GST registration and compliance rating are separate concepts.
GST Registration
Registration establishes a person’s status as a registered person under GST and provides a GSTIN subject to the applicable provisions.
Compliance Rating
Section 149 concerns the assessment or rating of the registered person’s compliance record.
A taxpayer can therefore have GST registration without the registration itself being the same thing as a compliance rating.
Is Compliance Rating the Same as GST Return Filing?
No.
Return filing is only one part of GST compliance.
Section 149 refers broadly to the record of compliance with the provisions of the Act.
Therefore, the statutory concept is broader than simply checking whether a return has been filed.
The actual parameters, however, depend on the prescribed framework.
Is Compliance Rating Based Only on Tax Paid?
Section 149 does not say that the compliance rating must be based only on the amount of tax paid.
It refers to the registered person’s record of compliance with the provisions of the Act.
Therefore, the concept is broader than simply measuring tax payments.
For example, GST compliance can involve return filing, invoicing, record keeping, payment obligations and other statutory requirements.
The exact parameters must be determined from the applicable prescribed framework rather than assumed from Section 149 alone.
Importance of Timely GST Compliance
Even apart from the compliance-rating framework, timely GST compliance is important because GST law contains separate consequences for failures such as:
- delayed return filing;
- non-payment or short payment of tax;
- incorrect reporting;
- non-compliance with invoicing requirements;
- failure to maintain required records; and
- other statutory violations.
A compliance-rating mechanism, where implemented, can provide an additional way of reflecting a taxpayer’s compliance record.
Compliance Rating and Suppliers
The supplier-related aspect is particularly relevant to businesses.
A registered person may want to assess the compliance profile of a supplier before entering into a commercial relationship.
The GST Council’s Know Your Supplier discussions specifically recognised the need for registered persons to have basic information about suppliers with whom they propose to conduct business.
This can be particularly relevant in GST transactions because the recipient’s compliance position may depend on the underlying supply documentation and supplier-side reporting in situations prescribed by the law.
Example – Regularly Compliant Supplier
Suppose Company A regularly:
- files its GST returns within the prescribed time;
- reports its outward supplies;
- pays its tax liabilities;
- maintains GST records; and
- complies with other applicable GST requirements.
A compliance-rating framework could use prescribed compliance parameters to reflect this record.
The exact score or rating, however, would depend on the parameters and mechanism prescribed under the GST framework.
Example – Repeated Compliance Defaults
Suppose Company B repeatedly fails to comply with applicable GST filing requirements and has other compliance defaults.
If such matters are included in the prescribed parameters, they could affect the compliance assessment of Company B.
The precise impact cannot be determined merely from Section 149 because the section does not itself prescribe a numerical scoring formula.
Example – Rating Updated Over Time
Suppose a registered person had compliance issues during an earlier period but subsequently regularised the position and maintained timely compliance.
Because Section 149(3) contemplates periodic updating, the compliance information can potentially reflect changes over time under the prescribed mechanism.
Section 149 and Input Tax Credit
Compliance information about suppliers can be relevant to recipients because GST law contains various conditions governing input tax credit.
A recipient may therefore have a commercial interest in understanding the compliance profile of suppliers.
The GST Council’s Know Your Supplier proposal specifically arose in a context where supplier compliance could affect the recipient’s ITC position.
However, a compliance rating should not be treated as a substitute for checking the statutory conditions for input tax credit.
A recipient must independently comply with the applicable ITC provisions.
Section 149 Does Not Automatically Determine ITC Eligibility
A supplier’s compliance rating, where applicable, does not by itself establish that every invoice issued by that supplier is eligible for input tax credit.
ITC eligibility continues to depend on the conditions prescribed under the CGST Act and Rules.
Therefore, businesses should not treat a compliance rating as an automatic certificate of ITC eligibility.
Compliance Rating and GST Portal Information
The GST framework is heavily dependent on electronic systems and the common portal.
Section 149 contemplates that the compliance rating can be intimated to the registered person and potentially placed in the public domain in the prescribed manner.
The GST Council’s Know Your Supplier discussions also contemplated providing supplier-related information through the GST system.
The precise availability and form of information should, however, be determined from the currently applicable GST portal functionality and prescribed legal framework rather than assuming that every parameter discussed in Council documents is currently displayed.
Section 149 Uses the Word “May”
The word “may” appears repeatedly in Section 149.
For example:
- a registered person may be assigned a compliance rating score;
- the score may be determined on prescribed parameters;
- the score may be updated periodically; and
- it may be placed in the public domain.
This wording is important because the section establishes an enabling statutory framework.
It should not be read as saying that every registered taxpayer must always have a publicly visible numerical score under Section 149.
Is There a Fixed GST Compliance Rating Score in Section 149?
No.
Section 149 does not prescribe a fixed number such as:
- 5 stars;
- 10 points;
- 100 points; or
- any other universal score.
Instead, it says that the score may be determined on the basis of parameters that may be prescribed.
Therefore, a specific scoring system should not be attributed to Section 149 unless it is supported by the applicable rules, notifications or official GST framework.
Proposed Compliance Parameters and the Actual Statute
The GST Council has discussed several possible parameters under the Know Your Supplier initiative.
For example, the Council agenda discussed information such as:
- GST registration date;
- taxpayer category;
- turnover slabs;
- cash-payment percentage;
- return-filing information;
- e-way bill blocking history; and
- certain filing defaults.
These discussions are useful for understanding the policy background of Section 149, but they are not the same thing as the wording of Section 149 itself.
This distinction is important when writing about GST compliance ratings because proposals and agenda items should not be presented as if they were mandatory statutory parameters.
Section 149 and Know Your Supplier – Difference
| Section 149 | Know Your Supplier |
|---|---|
| Statutory provision for GST compliance rating | GST Council-discussed transparency/compliance information facility |
| Provides for compliance rating score | Intended to provide basic supplier information |
| Parameters may be prescribed | Various information parameters were proposed/discussed |
| Rating may be updated periodically | Supplier information can support commercial due diligence |
| May be communicated/publicly disclosed in prescribed manner | Designed to help registered persons understand supplier credentials |
The GST Council discussed Know Your Supplier as a trade-facilitation measure and linked the concept with the need for registered persons to have basic supplier information.
Section 149 and Other GST Compliance Provisions
Section 149 does not operate in isolation.
It forms part of Chapter XXI of the CGST Act, which contains miscellaneous provisions.
It sits alongside provisions dealing with matters such as:
- the common portal;
- deemed exports;
- special procedures;
- information returns;
- statistics;
- confidentiality and disclosure;
- expert assistance;
- samples;
- burden of proof; and
- other administrative matters.
Section 149 therefore provides a compliance-transparency mechanism within the broader GST administration framework.
Section 149 and Section 146
Section 146 deals with the Common Portal.
The Government may notify the common GST electronic portal for functions including registration, payment of tax, furnishing returns, computation and settlement of integrated tax, electronic way bills and other prescribed functions.
Section 149 deals specifically with compliance rating.
Therefore:
Section 146 → Common GST electronic portal
Section 149 → GST compliance rating
The two provisions can be connected from an administrative and technology perspective, but they deal with different statutory subjects.
Section 149 and Section 150
Section 150 deals with the obligation to furnish information return by specified persons.
Section 149, in contrast, concerns the compliance rating of registered persons.
Therefore:
Section 149 → Compliance rating
Section 150 → Information return
The provisions can contribute to GST administration in different ways, but they should not be confused.
Section 149 and Section 164
Section 164 gives the Government power to make rules for carrying out the provisions of the CGST Act.
Section 149 itself expressly refers to parameters and manner being prescribed.
Therefore, the rule-making framework is relevant when determining how the statutory concept of compliance rating is intended to operate.
Practical Importance for Businesses
Businesses should maintain strong GST compliance regardless of whether a specific rating is currently visible or assigned.
A sound compliance system should include:
Timely Return Filing
Ensure applicable GST returns and statements are furnished within the prescribed time.
Accurate Reporting
Ensure outward supplies, inward supplies and other relevant information are correctly reported.
Timely Tax Payment
Pay GST liabilities within the prescribed time.
Proper Documentation
Maintain invoices, credit notes, debit notes, agreements and other required records.
E-Way Bill Compliance
Where applicable, ensure e-way bill requirements are properly followed.
Input Tax Credit Controls
Maintain appropriate checks before claiming input tax credit.
Regular Reconciliation
Reconcile books of account, GST returns, invoices and relevant GST portal data.
Monitor Notices and Communications
Regularly check GST portal communications and respond to notices within the prescribed period.
These practices support overall GST compliance and are consistent with the broader purpose of maintaining a reliable compliance record.
Does a Good Compliance Rating Remove GST Liability?
No.
A compliance rating does not eliminate a taxpayer’s underlying GST obligations.
Even if a taxpayer has a favourable compliance record, the taxpayer must continue to:
- calculate tax correctly;
- issue proper documents;
- file returns;
- pay tax;
- maintain records; and
- comply with applicable GST provisions.
Compliance rating is an administrative assessment mechanism and not a tax exemption.
Does a Low Compliance Rating Automatically Impose a Penalty?
Section 149 itself does not provide a penalty merely because a compliance rating score is low.
Penalties and other consequences for GST violations arise under the specific provisions of the CGST Act and Rules applicable to the particular default.
Therefore, compliance rating should not be confused with the penalty provisions of GST law.
Does Compliance Rating Change the GST Rate?
No.
Section 149 does not determine the rate of GST applicable to a supply.
GST rates are governed by the applicable provisions, notifications and rate schedules.
A compliance rating is an assessment of compliance and does not itself change the rate of tax applicable to a taxpayer’s goods or services.
Does Compliance Rating Replace GST Audit or Assessment?
No.
GST audit, scrutiny, assessment and compliance rating are separate concepts.
For example:
- Section 61 deals with scrutiny of returns;
- Section 65 deals with audit by tax authorities;
- Section 66 deals with special audit;
- Sections 73, 74 and 74A deal with specified tax determination proceedings; and
- Section 149 provides for GST compliance rating.
A compliance rating does not replace these statutory proceedings.
Important Points to Remember About Section 149
The main points of Section 149 are:
- Section 149 deals with Goods and Services Tax compliance rating.
- It applies to registered persons.
- The Government may assign a compliance rating score.
- The score is based on the registered person’s record of compliance with the GST Act.
- Section 149 does not itself prescribe a fixed numerical scoring system.
- The score may be determined using parameters that may be prescribed.
- The score may be updated periodically.
- The registered person may be informed of the rating in the prescribed manner.
- The rating may also be placed in the public domain in the prescribed manner.
- The provision is designed as an enabling framework for GST compliance assessment.
- The GST Council has discussed the provision in connection with the Know Your Supplier concept.
- Know Your Supplier was discussed as a mechanism for giving registered persons basic information about suppliers.
- Council discussions included possible supplier-related parameters, but those proposals should not be confused with the statutory wording of Section 149.
- A compliance rating is not the same as GST registration.
- A compliance rating is not the same as return filing.
- A compliance rating does not itself determine ITC eligibility.
- A compliance rating does not itself impose a penalty.
- A compliance rating does not change the GST rate.
- A compliance rating does not replace GST scrutiny, audit or assessment.
- Businesses should continue to maintain accurate and timely GST compliance regardless of the rating mechanism.
👉 Read More → Section 149 – Goods and services tax compliance rating
Conclusion
Section 149 of the CGST Act provides the statutory framework for a Goods and Services Tax compliance rating. Under Section 149(1), the Government may assign a compliance rating score to a registered person based on the person’s record of compliance with the GST provisions.
Section 149(2) provides that the compliance rating score may be determined using prescribed parameters. This means that the section itself does not establish a fixed scoring formula or a universal number of points. The specific parameters must come from the applicable prescribed framework.
Section 149(3) further provides for periodic updating of the compliance rating and contemplates its communication to the registered person and placement in the public domain in the prescribed manner. This gives the provision a potential transparency and compliance-monitoring function.
The GST Council has also discussed the compliance-rating provision in connection with the Know Your Supplier initiative. The Council considered providing registered persons with basic information about suppliers, including information that could help businesses understand supplier compliance and make informed commercial decisions. However, the parameters discussed in Council agenda documents should not be treated as the statutory scoring formula under Section 149 unless they are actually prescribed through the applicable legal framework.
For businesses, the practical lesson is to maintain consistent GST compliance through timely return filing, accurate reporting, proper documentation, timely tax payment, appropriate record keeping and compliance with applicable GST procedures. A compliance rating, where assigned, is only one part of the GST administration framework and does not replace the taxpayer’s underlying legal obligations.
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