Vendor Master Data: The Compliance Fields Most Businesses Never Capture
Akash Kore
· Founder & Product Architect· 3 min read
Vendor master data is unglamorous and decides a surprising amount: whether you deduct TDS at the right rate, whether a purchase is deductible this year, whether your input credit survives, and whether the money reaches the right account.
- ✓MSME classification must be captured at onboarding to apply Section 43B(h) correctly.
- ✓GSTIN status should be verified periodically, not once.
- ✓Missing PAN triggers higher TDS rates under Section 206AA.
- ✓Bank account verification prevents the most expensive category of payment error.
The fields that carry statutory consequences
- Udyam registration number and classification: determines whether Section 15 payment limits and Section 43B(h) apply.
- GSTIN and its current status: an invoice from a vendor whose registration has been cancelled will not appear in your GSTR-2B.
- PAN: absence triggers TDS at twenty per cent or the specified rate, whichever is higher, under Section 206AA.
- Section 206AB status: a higher TDS rate applies to specified non-filers of income tax returns.
- Bank account and IFSC, verified by penny drop rather than by email instruction.
Why classification must be captured at onboarding
Section 43B(h) attaches by reference to the supplier's status at the time of the transaction. A Udyam certificate collected in March, after a year of purchases, does not tell you what the classification was in June.
Capturing it at onboarding and refreshing it annually is the only way the ageing report can reliably filter micro and small payables, which is what the year-end exercise actually requires.
GSTIN status is not static
Registrations get cancelled, suspended and restored. A vendor whose registration was cancelled mid-year will not file GSTR-1, so invoices from the affected period never reach your GSTR-2B and the credit is lost.
Periodic bulk verification against the GST portal catches this before the credit is claimed rather than after it is reversed.
Bank details and payment fraud
The commonest invoice fraud is not a fake invoice; it is a genuine invoice with altered bank details, sent from a compromised or spoofed email account. Changes to vendor bank details should require verification through a channel other than the one the request arrived on.
Penny-drop verification at onboarding and a documented change-control process for bank details are the two controls that prevent almost all of it.
Frequently asked questions
### Do I need the Udyam certificate or just the number?
The number is sufficient to record, but obtain and retain a copy of the certificate, because it evidences the classification — micro, small or medium — on which Section 43B(h) turns. The classification matters more than the number itself.
### What TDS rate applies if a vendor has no PAN?
Under Section 206AA, the higher of the rate specified in the relevant provision, the rate in force, or twenty per cent. For many payments this effectively doubles or trebles the deduction, and the vendor cannot claim credit for it without a PAN.
### How often should I verify a vendor's GSTIN?
Periodically rather than once, because registrations are cancelled and suspended. A quarterly bulk check against the GST portal is proportionate for most businesses and catches the cases that would otherwise surface as missing entries in GSTR-2B.
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Frequently Asked Questions
Do I need the Udyam certificate or just the number?
The number is sufficient to record, but obtain and retain a copy of the certificate, because it evidences the classification — micro, small or medium — on which Section 43B(h) turns. The classification matters more than the number itself.
What TDS rate applies if a vendor has no PAN?
Under Section 206AA, the higher of the rate specified in the relevant provision, the rate in force, or twenty per cent. For many payments this effectively doubles or trebles the deduction, and the vendor cannot claim credit for it without a PAN.
How often should I verify a vendor's GSTIN?
Periodically rather than once, because registrations are cancelled and suspended. A quarterly bulk check against the GST portal is proportionate for most businesses and catches the cases that would otherwise surface as missing entries in GSTR-2B.
Akash Kore
Founder & Product ArchitectArchitecting business document operating systems and automated billing workflows for Indian SMBs, agencies, and enterprises.