Paying a new supplier you haven't verified is one of the most common ways Indian businesses lose money — to shell companies, struck-off entities, or invoice-redirection fraud. The good news: almost everything you need to vet a vendor is already public, in the Ministry of Corporate Affairs (MCA) and GST records. Here's a practical checklist.
1. Confirm the legal identity
Ask for the supplier's CIN (if a company) or GSTIN. Check that the legal name on the invoice matches the name on record, the company is Active on both MCA and GST, and the incorporation date is consistent with how long they claim to have traded. A brand-new entity quoting a decade of experience is a flag.
2. Check GST registration and filing history
An active GSTIN with regular GSTR-1 and GSTR-3B filings is a strong sign of a real, operating business. Lapsed or missing filings, a cancelled/suspended GSTIN, or a very high declared cash-transaction percentage are reasons to slow down before a large first-time payment.
3. Look at the directors and their network
Review the current and former directors, their DIN status, and whether any are disqualified. A director linked to many companies — especially struck-off or amalgamated ones — can indicate a shell network. See our guide on spotting a shell company.
4. Check charges, tax compliance and MSME status
Registered charges show how leveraged the company is. The income-tax 206AB check flags non-filers (which means higher TDS for you). If the supplier is a registered Micro/Small enterprise under Udyam, the 45-day payment rule applies to you.
5. Match the bank account to the entity
Even a perfectly legitimate company can be impersonated. Before releasing funds, confirm the bank account on the invoice belongs to the verified legal entity — not a personal or third-party account. For large or first-time orders, start with a milestone payment and request a recent trade reference.
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