29 Jun 2021, 11:09 — 7 min read
The introduction of the Goods and Services tax was one of the most significant changes that India’s taxation system had undergone in recent years. The government has recently made it possible for companies to leverage their GST returns to take out high-value GST business loans. These GST loans help in quick business financing, leading to better cash flow and corporate financial flexibility. The best business loans also help in financing working capital needs, serving as both a short and long-term solution. So, what are the best business loans banks offer in India? This article will look at how GST business loans work, why they are important, and how businesses can obtain them.
A GST business loan works as a collateral-free loan that does not require the borrower to mortgage any property as collateral. Financial institutions assess the borrowing capacity of applicants by analysing their GST returns. Based on their previous tax returns, the financial institutions approve a suitable GST loan, leading to faster loan approval and credit availability. GST business loan approval does not require additional financial documents, making it quick and easy to get such GST loans. Various banks and other financial institutions have kept limits on the maximum amount they will offer via such GST loans.
Several private and public sector banks now offer such GST business loans to applicants. Hence, choosing the best business loan can be a tricky affair. Additionally, different banks have different thresholds for the maximum credit they will extend businesses via a GST business loan. The government has capped the business loan at INR 1 crore. Business sectors, from manufacturing to distribution, will benefit from the introduction of this new system. The following business entities can avail a GST business loan in India under the new scheme;
Additionally, manufacturers, retailers, service providers, wholesalers, and traders who export or import products to and from India may apply for a GST business loan. In most cases, small and medium enterprises will receive such loans as they are the ones that find it most difficult to get funding. Hence, the following business entities that fall into the MSME category can avail of the best business loans from banks by simply furnishing their GST returns.
The government has started a new 59-minute website that MSMEs can use to avail of a GST business loan ranging from INR 10 lakhs to INR 1 crore. As the name suggests, the whole process will be complete within an hour, giving businesses access to quick and effortless funding. The GST loan approval process has been updated to become contactless and fully automated. The interest rate for such loans start from 8%, and they require the applicant to provide no collateral whatsoever. The handing out of such GST loans is connected to the Credit Guarantee Fund Trust for Micro and Small Enterprises Scheme, better known as the CGTMSE Scheme. Once approval has been granted, funds will be disbursed in about a week.
This web portal makes use of advanced algorithms to prevent frauds and other issues and to verify all the details submitted by the applicants. The portal also connects with various banks, helping prevent physical meetings and visits. The GST loans will be provided mostly by the Small Industries Development Bank of India and other public sector banks, including the following;
Lastly, the applicant must choose the appropriate lender, pay the required processing fees and wait to download a copy of the approval letter once the processing is complete. The only eligibility criteria for applying for such loans is that the business must be at least a year old, and must have monthly sales of at least INR 2,00,000.
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Posted byVakilsearch Staff
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