Steps that an enterprise takes to ensure vendor invoices are compliant

Updated on :  

08 min read.

Availability of tax credits to the buyer is dependent on the vendor’s compliance with the payment of taxes and filing of returns. Thus, it is important to ensure that vendor invoices are tax compliant.

Here are some of the ways by which a business can ensure that their vendors are 100% compliant and report their invoices to the government on time:

  • Authenticity: The first thing to do is to check the authenticity of vendor invoices. You can check this by verifying the GSTIN of the taxpayer and also verifying the registration certificate of the vendor.
  • Use automated accounts payable processing: Manual processes account for greater inaccuracies. Start using automated techniques to process vendor invoices. This will help you identify errors in the invoices and ensure that all tax-related information is correctly mentioned in the invoice.
  • Download GSTR-2B report: The taxpayer should download the GSTR-2B report from the GST portal. It allows you to check whether the sale invoices reported by vendors align with the input tax credit intended to be claimed by you in GSTR-3B. In case of any inconsistencies, you can reach out to the vendor and resolve them.
  • Check whether GST returns are filed: One can check the GST return status of any person on the GST portal. Click on the search taxpayer tab and enter the GSTIN. Then, enter the captcha and click on search. Here, you can see the GST validity status and the GST returns filing table. It gives you the filing status of various GST returns, such as GSTR-1 and GSTR-3B, applicable to the vendor.
  • Ensure if e-invoicing applies to your vendor: One can confirm this by visiting the e-invoice portal. Go to the search tab and click on ‘GSTINs generating Invoice Registration Number’. The respective page will open, and you can download the file, which will give you a list of GSTINs generating Invoice Registration Number (IRN). You should check if e-invoicing applies to a particular vendor, then his invoices should be e-invoicing compliant. 
  • Regular follow-ups with vendors: One should follow the practice of managing regular follow-ups with your vendors regarding filing returns on time. 
  • Charge penalty: You can start charging a penalty to the vendors if they fail to upload invoices on time. If there is a delay in uploading invoices and filing in GSTR-1, you may not be able to claim ITC.  
    Also, you can add indemnity clauses in vendor contracts to protect your interest.
  • Hold vendor payments: One can also hold vendor payments to the extent of GST if they default in reporting invoices in GSTR-1.

Failure to ensure compliance may lead to fines, penalties, a halt to your production, and may also impact your working capital. Thus, ensuring regulatory compliance is essential to operate effectively and efficiently.

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