Looking for 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.
The deployment of the Goods and Services Tax regime (GST) was one of the most significant changes to India’s taxation system in recent years. The government recently made it possible for businesses to use their GST returns to obtain high-value GST business loan.
These GST loans facilitate quick business financing, resulting in improved cash flow and financial flexibility for corporations. The best business loans also aid in the financing of working capital requirements, acting as both a short-term and long-term solution.
What Is a GST Business Loan?
A GST business loan is a collateral-free loan in which the borrower is not required to mortgage any property as collateral. Financial institutions evaluate applicants’ borrowing capacity by reviewing their GST returns. Banking firms then approve a suitable GST loan based on their previous tax returns, resulting in faster loan approval and credit availability.
GST business loan approval does not necessitate the submission of additional financial documents, making such GST loans quick and simple to obtain. Who Can Avail a GST Business Loan?
Applicants can now obtain such GST business loans from a number of private and public sector banks. As a result, selecting the best business loan can be a difficult task. Furthermore, different banks have different credit limits for the amount of credit they will extend to businesses through a GST business loan.
The government has set a limit of ₹ 1 crore for business loans. The implementation of this new system will benefit business sectors ranging from manufacturing to distribution. Under the new scheme, the following business entities can obtain a GST business loan in India:
- Public limited companies
- Private limited companies
- Partnership firms
- Sole proprietorships
Furthermore, manufacturers, retailers, service providers, wholesalers, and traders who export or import products to and from India are eligible to apply for a GST business loan. Small and medium-sized businesses are more likely to receive such loans because they have the most difficulty obtaining funding. As a result, MSME business entities can obtain the best business loans from banks simply by submitting their GST returns.
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Documents Required for GST Business Loan
- PAN card
- Residential address proof: rent agreement/ driving license/ Aadhaar card/ voter’s ID/ ration card/ passport
- Bank account statements of the last six months
- GST registration certificate/ company incorporation certificate/ shops and establishment certificate/ business PAN/ trade license
- Applicants applying for loans worth over ₹ 20 Lakhs, must submit the following;
- Audited financial statements from the last two years
- Income tax returns from the last two years
- GST Returns of the past six months
What Is the 59-minute Government Portal?
The government has launched a new 59-minute website through which MSMEs can apply for a GST Business Loan ranging from ₹ 10 lakh to ₹ 1 crore. As the name implies, the entire process will be completed in an hour, providing businesses with quick and easy funding. The GST loan approval process has been updated to be completely automated and contactless. The interest rate on such loans starts at 8%, and the applicant is not required to provide any collateral. The distribution of such GST loans is linked to the Credit Guarantee Fund Trust for Micro and Small Enterprises Scheme, or CGTMSE Scheme. Funds will be disbursed in about a week after approval is granted.
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;
- State Bank of India
- Punjab National Bank
- Bank of Baroda
- Indian Overseas Bank
- Vijaya Bank
What Are the Steps Involved in Availing a GST Business Loan?
- First and foremost, MSMEs loan will have to register on the government portal by providing their email ID, mobile number, and full name.
- Next, the applicants must log in to the portal and provide their GST details and tax information as required.
- Applicants will then have to upload their tax returns and other financial documents in XML format. They also have the option of logging in using their PAN and incorporation date.
- Similarly, applicants must either upload or log in using their banking credentials to give the officials access to their bank statements.
- Next, they will have to provide details regarding the directors, partners and owners of the company. They must also furnish further details regarding their business, why they need the loan and whether they have taken out any loans in the past.
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 ₹ 2,00,000.
Conclusion
In conclusion, securing a business loan based on Goods and Services Tax (GST) registration provides entrepreneurs with a valuable financing option to fuel growth and expansion. By leveraging GST registration as proof of income and financial stability, businesses can access funding from banks and financial institutions to meet various operational needs, invest in infrastructure, and capitalize on growth opportunities. However, it’s essential for businesses to ensure compliance with GST regulations and maintain accurate financial records to maximize the benefits of GST-based lending. With careful planning and strategic financial management, GST business loans can catalyze success in today’s dynamic business landscape.
FAQs
How to get a business loan on GST?
Businesses can apply for a loan using their Goods and Services Tax (GST) registration as proof of income and financial stability. Banks and financial institutions may require additional documents and information to process the loan application.
What are the documents required for GST?
Documents required for GST registration typically include PAN card, proof of business registration, identity and address proof of business owners/partners/directors, bank account details, and business address proof.
Who is eligible for a GST loan in India?
Businesses registered under GST and meeting the lender's eligibility criteria, such as creditworthiness and financial stability, are eligible to apply for a GST loan in India.
How do I get GST without address proof?
If you do not have address proof for your business, you may use alternative documents such as rent agreement, utility bills, or a declaration from the landlord to obtain GST registration.
How much turnover is required for GST?
Businesses with an annual turnover exceeding the threshold limit specified by the GST council (which varies based on the type of business and state) are required to register for GST.
Can a person claim ITC without GST registration?
No, only registered taxpayers under GST can claim Input Tax Credit (ITC) on eligible purchases made for business purposes.
Who is exempted from GST return?
Certain categories of taxpayers, such as small businesses with turnover below the threshold limit, exporters, and those engaged in specific activities exempted by the GST council, may be exempt from filing GST returns
Why is dual GST required?
Dual GST, consisting of Central GST (CGST) and State GST (SGST), is required in India to ensure a comprehensive and uniform indirect tax system while maintaining fiscal autonomy for both the central and state governments.
Is GST compulsory for small businesses?
Small businesses with an annual turnover below the threshold limit specified by the GST council are not required to register for GST. However, registration may be beneficial for availing input tax credit and participating in the formal economy.
Can we get the GST number on the residential address?
No, GST registration requires a valid business address where business activities are conducted. Residential addresses are generally not accepted for GST registration purposes.
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