While small and medium businesses are expected to face teething trouble in complying with the Goods and Services Tax regime, the new tax system will also open an opportunity for them to access credit as GST filings are set to become a significant data source for flow-based lending.
Both banks and digital lending players say GST filings can be the best trove of information to lend to small businesses and will also reduce risks and cut costs while scoring these businesses for credit worthiness.
“GST will help make invoicing and data analytics around businesses more credible. In the long term, it will be beneficial for both SMEs and lenders,” said Rajeev Ahuja, head of strategy, retail and financial inclusion at RBL Bank.
“For banks like us, it will help reduce costs of doing business. Today, assessing small business involves feet on street and operational work. With GST, there will be a significant opportunity for many service providers to leverage that data. There will be more authentic information on small businesses, which can also help reduce risks in lending,” he added.
GST, which is set to roll out from July 1, is expected to see eight million taxpayers come under the new tax regime, with more than 2 billion invoices expected to be filed every month.
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