Document

Leverage your GST returns to get working capital financing

By Annapoorna

|

Updated on: Jul 17th, 2023

|

5 min read

social iconssocial iconssocial iconssocial icons

Working capital financing is crucial to business management, especially for small and medium businesses. And you can use your Goods and Services Tax (GST) returns to get an unsecured working capital loan. Such loans can be taken without pledging collateral. 

Continue reading to know more about how your GST returns can finance your working capital. 

Meaning of working capital financing 

Working capital financing funds the working capital (the difference between current assets and liabilities) needs of a business. It helps the company stay afloat by financing its payment gaps to fulfil its working capital requirement. 

Working capital loans are collateral-free, get speedy approvals, and have flexible repayment options. Other sources of working capital financing include cash credit, bank overdraft, working capital loan, trade credit, discounting of bills, among others. 

Ways in which GST returns can be leveraged for working capital financing 

A GST based loan for a business is an unsecured loan that allows business owners with registered GST numbers or GSTIN to take a loan to raise working capital financing. 

The following are how businesses can leverage GST for working capital financing: 

  • Businesses can finance their working capital by taking loans against their GST returns. India’s Micro, small, and medium businesses can apply for loans up to Rs. 1 crore based on GST returns
  • Under GST, export businesses can get back 90% of the input tax they paid on the goods exported outside India — as long as they do so within seven days. This can reduce their cost of operation and increase net business margins, thus easing their working capital requirements. However, tax paid on business overheads is not allowed as an input tax credit (ITC). ITC can be claimed on input and input services. With assistance of loan, businesses can pay input tax within timely manner.
  • Some players offer loans up to Rs 2 crore to businesses on the basis of their GST returns. Such loans are both secured and unsecured, with interest rates being determined on the basis of business’ loan amount, tenure, and the business’ financials. 

Meaning, benefits and eligibility for GST loan for business 

MSMEs can apply and get loans upto Rs 15 Lakhs against their GST returns by using platforms like Clear Invoice financing in a fully digital manner 

The interest rates can range from 12-18% and do not require security in the form of collateral. 

Eligibility on GST loan for businesses

  • Registration and operation of the business should at least be a three old
  • Business should have monthly sales of at least Rs. 2,00,000

Some benefits of the GST loans

  • ST loans do not require collateral from business owners, making it easier for them to access funds without risking their assets.
  • Very limited documents are needed to process the application for GST loans, so the approval process is fast. 
  • Loan limits are granted basis GST filling history so credit assessment process is digital
  • GST loans offer flexible repayment options to borrowers to suit their cash flow needs. The loan tenure can range from 1–36 months, depending on the lender and the loan amount. 
  • GST loans are based on turnover as per GST returns and do not require financial analysis, balance sheet, or bank statements for assessing the limit. This simplifies the application process and reduces the paperwork considerably. 

Conclusion

If you are facing challenges in meeting your short-term expenses, a working capital financing  is just what your business needs. You can get it easily and efficiently by leveraging your GST returns. Furthermore, these loans get comparatively faster approvals, come with flexible repayment options, and have higher loan amounts. 

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

Index

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption