Top MSME GST Loan Schemes

The Indian economy relies heavily upon Micro, Small, and Medium Enterprises (MSMEs) as they represent a major source of both employment and GDP. Financing these enterprises is crucial to their survival, and as such, many require loans to facilitate their expansion or continued existence.

The introduction of the Goods and Services Tax (GST) has made things easier by making certain loan schemes under GST more accessible to MSMEs, thanks to improved transparency in the system. This document provides information about some of the most popular MSME GST loan schemes, their associated benefits, and how these facilities are enabled through GST-related documentation

Why Are MSME GST Loan Schemes Popular?

MSME GST loan schemes refer to specific financial instruments created to extend credit facilities to small-scale businesses based on their monthly GST returns. Banks and other Non-Banking Financial Companies (NBFCs) utilise this data during the assessment process since it helps them to fast-track loan approvals as well as disbursements.

Also Read: Eligibility and Documents Required for MSME Certification

Importance of GSTIN and How to Check GST Status

What Is GSTIN Number?

GSTIN number is a unique identification number that is assigned to every business that has been registered under GST comprising 15 digits. It is used as a legal means of identification for all tax-related transactions or matters that concern any given company’s dealings. You can verify its correctness using GSTIN check or GSTIN verification on government websites.

How to Check GST Status?

• Visit the GST portal.
• Enter your GSTIN number or Application Reference Number (ARN).
• Check the validity of the GST registration status.

Benefits of MSME GST Loan Schemes:

• Faster loan approvals due to the available GST data.
• Most oftentimes, these types of loans do not require any collateral; hence, they are unsecured loans.
• Clear credit evaluation based on GSTR (GST Returns).
• It also ensures that enterprises manage their working capital effectively.

Also Read: Benefits of MSME Certification

Documents Needed To Apply For An MSME GST Loan Scheme

Businesses intending to seek concessional MSME GST loans should submit the following documents, among other things:

• GSTIN (Goods and Services Tax Identification Number).
• GST returns, especially GSTR 2A and GSTR 2B.
• GST ARN status (Application Reference Number status).
• Bank statements and company documents.

Understanding GSTR 2A and GSTR 2B

GSTR 2A

GSTR 2A form is automatically generated to display details of all the purchases made by a business. It gets updated with the supplier’s data.

GSTR 2B

GSTR 2B is another auto-drafted statement that details input credit tax. It enables businesses to verify and claim ITC in tax filing in case of GST.

Top MSME GST Loan Schemes in India

This segmentation includes some of the major MSME GST loan schemes that take place within India:

1. SIDBI GST Sahay Scheme

Established by the Small Industries Development Bank of India (SIDBI), this program provides an instant loan of up to INR 1 lakh rupees based on the GST return files.

Key Features:

• The loans are disbursed in hours.
• No need for collateral.
• The amount of the loan is governed by the returns filed under GST.

2. Mudra Loans for MSMEs

Mudra loans, under the Pradhan Mantri Mudra Yojana (PMMY), also consider GST filings to assess loan eligibility.

Key Features:

• Loans range between INR 50,000 and INR 10 lakh.
• Shishu loans (up to INR 50,000) have no processing fees.
• Interest rates are determined by the creditworthiness of the borrower as well as his/her GST compliance.

3. Stand-Up India Scheme

Stand-Up India Scheme promotes SC/ST and women entrepreneurship with loan amounts ranging from INR 10 lakh to INR 1 crore. GST compliance aids in faster approvals.

Role of ITC in GST for MSME Loans

ITC (Input Tax Credit) enables businesses to offset their purchase tax liabilities by claiming the credit for the GST paid. Hence, MSMEs need to keep ITC records accurate so that they are seen as financially disciplined and compliant companies. Thus, the chances of securing loans are higher.

How To Apply For An MSME GST Loan Scheme

Check GSTIN Status

Verify that your GSTIN number is active using the tools for checking, such as GSTIN validation options.

Track Your GST ARN Status

There is a need to confirm if your application has been processed by checking ARN.

Compile GST Documents

These should include GSTR 2A and GSTR 2B as well as other relevant documents relating to the sales tax portal.

Submit The Application

However, he/she must provide all necessary documents when making the application offline with a bank or NBFC.

Wait For Approval

Once verified, loans are typically disbursed within a few days.

The Bottom Line

MSME GST loan schemes are revolutionary for all those small firms around India. They provide a means of fast and transparent access to finance which allows the businesses to develop in a market where competition is so stiff.

Apply now for business loans for MSMEs for these benefits of an MSME GST loan scheme and take your business to the next level! Obtaining these loans becomes very easy when one has proper GST compliance as well as documentation.

Use a business loan calculator to determine your monthly EMIs before applying for a business loan. This way, you can also focus on achieving your financial goals without the hassle of manually calculating monthly instalments.

FAQs

Q.1. What are the 3 types of MSME loans?

A. The 3 types of MSME loans include the following –

• Term Loans for MSMEs
• Working Capital Loans
• MSME Project Loans

Q.2. Is a GST business loan available to any MSME?

A. Under the GST program, loans are offered based on the GST returns to MSME customers – both self-employed professionals and non-professional business owners (retailers and service providers).

Q.3. What is the 2 crore loan by the government?

A. CGTMSE — This credit guarantee scheme provides collateral-free loans up to INR 2 crore to new and existing small and medium enterprises (SMEs). The scheme covers up to 75% of the default risk of the lender and charges a one-time guarantee fee and an annual service fee.

Q.4. What is the 15 lakh subsidy for MSME?

A. One of the components of the scheme is Credit Linked Capital Subsidy (CLCS) under which a capital subsidy of up to INR 15 lakh is provided to Micro and Small Enterprises (MSEs) for accessing modern technology.

Q.5. Who cannot apply for MSME?

A. An individual cannot apply for MSME registration. A proprietorship, partnership firm, company, trust, or society with an investment below INR 50 crore and annual turnover below INR 250 crore are eligible for MSME registration.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com.