Before supplying on credit, confirm the buyer's GSTIN is Active and the name matches the order (a buyer registered in Tamil Nadu has a GSTIN starting 33), read the GST filing record, and check court cases and defaults reported by other suppliers. For tier-2 and tier-3 buyers, also check the filing record each quarter, not just at the start. FundRaksha Trust runs the GST check free and the full buyer report in one place.
How credit works in Chennai
In Chennai's auto chain, OEMs pay tier-1s, tier-1s pay tier-2s, and small machining, plating and heat-treatment job-workers at the bottom wait for everyone above. Monthly billing and debit notes are standard. Leather tanneries and finishers sell to exporters in Pallavaram and Ambur, and engineering job-workers in Guindy and Ambattur supply larger manufacturers.
IT and BPO services firms bill clients monthly, and pharma units sell to distributors across south India.
Credit risks typical of Chennai's trades
- Payment beyond 45 days down the auto chain, accepted to keep the work.
- Debit notes for rejections or price revisions after supply.
- Leather exporters delaying payment to tanneries when overseas orders slow.
- Job-work done on the buyer's material, leaving little to hold if the buyer delays.
- Pharma distributors paying in rotation.
Checks to run on a buyer
- Validate the GSTIN with the GSTIN validator. A Tamil Nadu registration starts with 33; a different prefix means the buyer is registered in another state, which is fine if it matches the billing address on the order.
- Run the [free Trust check](https://www.trust.fundraksha.com/gst-lookup): status Active, legal and trade name matching the purchase order, registration date and constitution.
- Read the filing record in the Advance GST report (129 RP), which also shows registered contacts, associated people and places, and defaults reported by other suppliers.
- For a larger order, the GST + Financial report (499 RP) adds court cases, tribunals and FIRs and the owner's credit score and loan record, fetched with the owner's consent, and ends in a give-credit, caution or avoid decision.
Job-workers hold the buyer's material, not their own, so their leverage is low. Run the Trust report before accepting a new principal and set a limit on unpaid work.
Worked example: an Ambattur plating job-worker and a tier-2 company
An Ambattur plating job-worker is offered ₹3,50,000 a month of work by a tier-2 company in Sriperumbudur, on 60 days. The GSTIN starts 33, is Active and files regularly. The GST + Financial report shows no court cases but two defaults reported by other job-workers. The job-worker agrees 30 days and stops accepting new lots whenever more than one month's billing is unpaid.
If a buyer stops paying
Act early. Start with a payment follow-up, then a legal notice by email and WhatsApp or by registered post with proof of delivery. For a bounced cheque, the Section 138 notice must go within 30 days of the return memo.
A micro or small supplier with Udyam registration located in Tamil Nadu can file on MSME Samadhaan before the Tamil Nadu Micro and Small Enterprises Facilitation Council (Commissionerate of Industries and Commerce (MSME Department), Government of Tamil Nadu, Chennai) once the buyer is past the agreed period, which the MSMED Act caps at 45 days. Interest runs at three times the RBI bank rate, compounded monthly.
Report the defaulter so other suppliers are warned, and for recovery help in the city see FundRaksha Chennai.
Sources
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.