Banks start to accept GST input claims to grant working capital loans

After 3 months of the roll-out of GST, lenders are gravitating to sanctioning working capital loans, especially to micro and small units, against documents used in the new tax regime.

They are no longer looking at just sales of the units concerned to decide on loan sanctions. Banks are looking at input credit in deciding how much working capital loans they should advance.

The country’s largest lender, State Bank of India, and Union Bank of India, have started giving loans, especially to micro, small and medium enterprises (MSMEs) after assessing their input tax credit claims.

A public sector bank executive said the large number of small and medium enterprises (SMEs) had been included under the ambit of formal trade with the introduction of the GST.

SMEs are facing a working capital crunch because in the absence of proper financial returns, they are unable to access bank credit. Besides this, entrepreneurs are facing a credit crunch because in the GST regime SMEs are entitled to input tax credit, and it is stretching their operating cycle.

SBI Chief General Manager (SME) V Ramling said using GST claims by banks would give SMEs the time to manage their working capital requirements till the time they got input tax credit. It will also help stabilise SMEs to run their operations without any hurdles.