What should you check before the first credit sale?
Complete the identity and authority checks before dispatch. A genuine registration does not establish that the person placing the order is authorised or that the delivery and payment instructions belong to the same entity.
- 1
Identify the legal customer
Put the GST-registered or otherwise contracting legal person on the order form and agreement. Record the trade name separately.
- 2
Verify the GST record
Compare status, legal name, trade name, constitution, registration date, address, and visible filing information with the customer's documents.
- 3
Confirm ordering authority
Verify the buyer, signatory, and accounts contact through a company-controlled phone number or domain email when possible.
- 4
Verify delivery instructions
Resolve any difference between the registered address, billing address, warehouse, and delivery point before goods leave your control.
- 5
Take specific trade references
Ask independently verified references about recent order size, agreed terms, actual payment timing, deductions, returns, and dispute resolution.
- 6
Search public court records
Search relevant names and jurisdictions, then inspect identifiers and orders before attributing a case to the customer.
- 7
Agree the first exposure
Start with an amount and credit period you can absorb if collection is delayed. Increase exposure only after your own payment history develops.
What should a simple trade-credit file contain?
A useful credit file lets another person reconstruct why credit was extended and what controls apply. Keep factual evidence, dates, approvals, and unresolved questions together.
Identity record
Legal name, trade name, GSTIN, constitution, registered address, and source retrieval date.
Authority record
Named buyer, signatory, accounts contact, verified phone or email, and approval evidence.
Commercial record
Limit, payment period, price, taxes, returns, dispute process, and order-change authority.
Fulfilment record
Purchase order, dispatch documents, proof of delivery, acceptance, and correspondence about shortages or defects.
Review record
Payment dates, deductions, disputes, limit changes, and the person who approved each exception.
Evidence versus inference in a credit decision
Separate what a source directly establishes from what you infer. This keeps a sensible control from becoming an unsupported accusation or creditworthiness verdict.
| Observation | Supported statement | Unsupported leap |
|---|---|---|
| GST status is active | Registration was shown as active on the search date | The customer will pay on time |
| A filing row appears late or absent | The public filing view showed that record | The business is insolvent |
| A similar name appears in a case | A candidate court record needs attribution | This customer committed wrongdoing |
| A reference reports late payment | One source described a past transaction | Every future invoice will be late |
| Bank name differs | Payment instructions need verification | The counterparty is fraudulent |
When should you review the customer again?
Review the file when exposure changes or the evidence changes. Useful triggers include a higher limit, longer terms, overdue invoices, a new bank account, a change in entity or ownership, a new delivery location, or inconsistent documents.
Your own ledger becomes the most relevant source over time. Track promised versus actual payment dates, disputed amounts, credit notes, partial payments, and who approved exceptions.
A review does not need a binary result. It can lead to a smaller limit, shorter terms, staged fulfilment, additional approval, partial advance, or a request for missing evidence.
Primary sources
These official sources support the factual parts of this guide. Check the live source again before relying on time-sensitive information.
- GST Search TaxpayerGoods and Services Tax Portal. Official taxpayer search by GSTIN, UIN, or PAN.Open official source
- Welcome Kit for New TaxpayersGoods and Services Tax Portal. Official guidance describing the details available through taxpayer search.Open official source
- Tax Invoice, Credit and Debit Note RulesCentral Board of Indirect Taxes and Customs. Official rules listing the particulars required on a GST tax invoice.Open official source
- eCourts Case StatuseCommittee, Supreme Court of India. Official District Court case-status search, including search by party name.Open official source
- High Court ServiceseCommittee, Supreme Court of India. Official High Court search by party name, case number, filing number, and other fields.Open official source
- Credit Information Companies (Regulation) Act, 2005India Code. Official legislation portal. Search this Act by title to read its text and details.Open official source
Frequently asked questions
What is trade credit?
Trade credit is an arrangement in which a supplier delivers goods or services before receiving full payment, with payment due later under agreed terms. It creates exposure that should be limited, documented, and reviewed.
Can a GSTIN be used as a business credit score?
No. A GSTIN is a tax-registration identifier. Public GST details can support identity and registration checks, but they do not create a lawful or reliable creditworthiness score.
How should a small business choose an initial credit limit?
Choose an amount based on your ability to absorb delay, the customer's verified identity and references, the reversibility of delivery, and the quality of your contract and collection evidence. There is no universal safe limit.
Does a court case mean I should refuse credit?
No automatic conclusion follows. First verify that the record belongs to the same entity, understand the party's role and the case status, review the orders, and consider the commercial context. Litigation alone does not prove wrongdoing or non-payment.
Editorial note: This guide is educational and based on public-source documentation available on the update date above. It is not a credit report, credit score, rating, legal advice, tax advice, or a guarantee about any counterparty.