Before you give credit to a new buyer, confirm that its GST registration is active and that it files returns regularly, see how long the business has existed, look for court cases over unpaid dues, and ask other suppliers how it pays. Then start with a small credit limit and a short credit period, put the terms in writing, and keep proof of every delivery. Raise the limit only after the buyer has paid a few invoices on time.
The checklist
| Check | Why it matters | How to do it |
|---|---|---|
| GST status | A cancelled or suspended registration is a clear warning. | Verify the GSTIN on the GST portal or use the free GST lookup. |
| Names and address | You should know exactly who owes you the money. | Match the legal name, trade name and address with the purchase order and the bank account. |
| Return filing regularity | Businesses in trouble often stop filing first. | Read the filing table on the GST portal. See what filing status tells you. |
| Age of the business | A longer record gives you more to judge by. | Look at the registration date on the GST record. |
| Court cases | Pending cases over unpaid dues or bounced cheques show how the buyer treats creditors. | Search public court records, or use a report that includes them. |
| Trade references | Other suppliers know how the buyer really pays. | Ask for two or three suppliers and call them yourself. |
| Who is behind the business | In a proprietorship or partnership, the owners are personally liable. | Note the constitution and the names of the proprietor, partners or directors. |
Start small and put it in writing
- Start with a small limit. Give a first order you can afford to lose, and a short credit period. Increase the limit only after a few invoices are paid on time.
- Take part payment in advance when the checks show mixed signals.
- Write the terms down. A signed purchase order or a short agreement should state the credit period, the due date, interest on late payment and where disputes will be heard. See credit terms for B2B sales.
- Keep proof of delivery. A signed delivery challan, e-way bill, lorry receipt or acknowledgement email is what proves the buyer received the goods.
- Send a tax invoice for every supply with the buyer's correct legal name and GSTIN.
- Record every payment and reminder. A clean ledger and a trail of written reminders make recovery much easier later.
Cheques as security
Many suppliers take post-dated cheques for the credit amount. A cheque does not make the payment certain, but it gives you a faster legal route. If a cheque given to pay a debt bounces, Section 138 of the Negotiable Instruments Act lets you send a written demand notice within 30 days of the bank's return memo. If the drawer does not pay within 15 days of receiving the notice, you can file a criminal complaint within one month after that.
Keep the cheque, the bank's return memo and proof that the notice was sent and delivered.
Warning signs
- GST status is Cancelled or Suspended, or the names do not match.
- Returns have not been filed for several periods.
- The registration is very new and the first order is unusually large.
- The buyer is in a hurry and resists written terms.
- The delivery address differs from the registered place of business and there is no clear reason.
- Pending court cases over unpaid dues, or reports from other suppliers that they were not paid.
One sign alone may have an innocent explanation. Several together are a reason to ask for advance payment.
How FundRaksha Trust helps with these checks
FundRaksha Trust puts several of these checks into one report by GSTIN. As described on the buyer verification page:
- The Basic check is free and shows GST status, legal and trade name, registration date, constitution and nature of business.
- The Advance GST report adds a GST health score, the filing record with delays and missing returns, and defaults reported by other suppliers.
- The GST + Financial report adds the owner's credit score and loan repayment record (fetched only after you confirm the owner's consent), court cases, and a give-credit, give-with-care or avoid answer with suggested terms. It is guidance on the data available that day; the final decision is yours.
- The watchlist re-checks a buyer's GST status, court cases and defaulter reports every month and alerts you when something changes.
- Receivables and per-buyer credit limits are tracked free of charge, and suppliers can report buyers who did not pay to the defaulter network.
Court records are matched by name from public data and can include people with similar names, so read each match with care. Current prices are on the pricing page.
Frequently asked questions
Is an active GST number enough to give credit?
No. It only shows that the business is registered. Also look at filing regularity, the age of the business, court cases and how the buyer pays other suppliers.
How much credit should I give a new buyer?
Start with an amount you can afford to lose and a short credit period. Raise the limit step by step after the buyer has paid a few invoices on time.
Can I check a buyer's credit score?
A credit report on a person can be fetched only with that person's consent. On FundRaksha Trust, the owner's credit report is fetched only after you confirm that you have the business owner's consent, and the confirmation is recorded.
Should I take post-dated cheques?
They are useful security. If a cheque given for a debt bounces, Section 138 of the Negotiable Instruments Act gives you a faster legal route, provided you send the demand notice within 30 days of the bank's return memo.
What if the buyer refuses to sign written terms?
Print your payment terms on the quotation and the invoice, and get the purchase order and delivery acknowledgement in writing. If a buyer resists every written record, ask for advance payment.
This guide is general information for Indian businesses, not legal or tax advice. GST data shown by any tool comes from public records and should be confirmed on the GST portal before you act on it.