SBI launches SME Assist for enterprises hurting from GST transition

To ease down pain for Micro, Small & Medium Entrepreneurs (MSME) arising from GST transition, the largest lender State Bank of India has launched its first-of-its-kind product called as 'SME Assist' for this sector. 

Under SME Assist, SBI will provide a short term working capital demand loan (WCDL) to MSMEs on their input credit claims under GST at a concessional rate of interest for a period of nine months. 

V. Ramling, CGM (SME) of SBI said, “This product will help them to manage their working capital requirement till the time they get input credit. It also supports the government’s GST initiative, as it will help stabilize the SMEs to run their operations without any hurdle.”

It has become more than three months now for Goods and Services Tax (GST) to be implemented, and currently transition towards this regime has been challenging for India Inc especially MSME sector. 

Since GST's inception on July 01, 2017, industrialist have been complaining that their business operations have slowdown and working capital requirement were hampered. 

A India Ratings report recently highlighted that MSMEs face higher challenge after GST as industry participants lack compliance infrastructure to map the entire outstanding inventory with tax invoices.

The report added, “MSMEs weak credit profile and  risk weights attached to the loans extended to this sector in banks’ books could force the sector to resort to borrowings from non-bank finance companies.”

Thus in major relief, WDCL in SBI will be sanctioned outside Assessed Bank Finance (ABF) at 20% of the existing fund based working capital limit or 80% of input tax claim due on purchases – whichever is lower . 

Not only this, a MSME borrower can also enjoy a moratorium period for the first three months. The ad-hoc amount can be repaid either in one bullet payment or in 6 EMIs in next six months after moratorium period is over. 

MSMEs can avail WCDL in SBI with a nominal processing fee of Rs 2,000 to meet their working capital requirement. A certificate from their chartered accountant confirming the input credit claims must be provided by a MSME opting WDCL under  the lender. 

This SME Assist facility will be only available till March 31, 2018. 

Recently, the GST council in its 22nd meet had allowed SMEs with annual turnover of up to Rs 1.50 crore to file for quarterly returns. Also the threshold limit for compensation scheme have been increased to Rs 1 crore from the current Rs 75 lakh to ease in a move to ease tax filing for small traders. 

Traders will now have to pay fixed tax rate between 1% - 5% under the composition scheme.