Startups to seek Finance Ministry nod for loans against pending GST input tax credit

In the MSME (Micro, Small, and Medium Enterprises) sector, this is a popular lending model that banks and non banking financial companies (NBFC) do

Startups bodies are drawing up a proposal to seek the Finance Ministry nod for loans against pending Goods and Services Tax input tax credit, according to a couple of sources aware of the development.

A couple of industry organisations are collating the scale of receivables from the CBIC and revenue department and the estimation is this could run up to a few thousand crores.

The startup industry bodies are expected to write to the Finance Ministry as soon as by end of this month.

“We are looking to write to the DFS and Revenue department to raise the request formally. We were speaking with a few founders and found out that all of them had a few hundred crores in pending GST inputs tax credit,” one of the sources said.

Most of the startups are loss-making, especially the smaller ones and this locked up working capital in making timely payments to vendors and employees.

“If we can get relatively cheaper working capital loans based on the receivables, it can be a huge relief,” said another founder requesting anonymity citing that no official communication has happened with the Finance Ministry as of yet.

In the MSME (Micro, Small, and Medium Enterprises) sector, this is a popular lending model that banks and non banking financial companies (NBFC) do. Since the receivables are from the government, the chances of the payment not getting credited is nil.

However, without a formal recognition from the Finance Ministry, the financial institutions are hesitant to lend to startups, the sources said.