This can significantly reduce friction in credit disbursement as it will enable small businesses to authorise lenders to access their tax records along with other financial information on a single platform.
The AA system is part of the array of Digital Public Infrastructure (DPI) that India has launched in recent years including others such as the Unified Payments Interface (UPI). It has been linked to more than 75 lakh bank accounts since its launch in September 2021, according to BG Mahesh, co-founder, and CEO of Sahamati, the non-profit that is promoting AA.
ETtechThe tax network GSTN has close to 1.4 crore registered taxpayers.
“GSTN is about to go live on AA in a matter of weeks. The implementation has been done. The numbers will further increase after that since the small businesses or GSTN payees will start applying for loans and they will be able to use AA for that,” Mahesh said.
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In response to ET’s queries on the development, GSTN officials did not specify the exact date on which the network will go live on the AA system but said it will be before July 1.
Finance Ministry officials said that banks and lenders can use GST returns as a financial statement to assess the financial health of small businesses.
“This will help in seamless sharing of account information of taxpayers and will help them in saving paperwork by allowing lenders to easily pull-out data from GST returns along with their savings, pension account and other aggregators,” they added.
Additionally, it will also help them “use the data to arrive at the correct tax assessment and will improve scrutiny,” officials noted.
Last November, the Reserve Bank of India included GSTN as a financial information provider under the account aggregator framework to facilitate a cash flow-based lending to micro, small and medium-sized enterprises (MSMEs).
Typically, an account aggregator enables the sharing of data between individuals and financial institutions. Lenders can seamlessly review this information before providing a loan to an individual or an entity without having to source information from multiple sources.
“Anyone who wants to apply for a loan can share their bank account data or GST data through AA in a single step. This will be convenient for the customer,” Sahamati’s Mahesh said.
The AA system started off with eight of India’s largest banks including the State Bank of India, ICICI Bank, HDFC Bank among others joining the network. Subsequently, those who were granted licences to become account aggregators could access information from the registered banks. Licence holders are of the view that GSTN coming on to the AA network significantly enhances creditworthiness and evaluation of all micro and small businesses.
Krishna Prasad, Founder CEO, OneMoney, one of the first account aggregators to get an operating licence, said that “GST data can now be combined with bank data, to generate a credit score (for small businesses.”
A senior official from NESL Asset Data Limited (NADL), another account aggregator on the network, said that the digital lending journey for the taxpayer will be much easier when the bank wants to give loans based on the GST.
“Currently, the taxpayer has to physically provide the GST details which is a longer process. Using the account aggregator with a single click and an OTP onboarding, all his GST details are directly downloaded to the lending institution, which means there is total transparency and is straight from the source,” the person added. “For MSMEs looking for credit, the journey is much easier,” he said.
The list of financial information providers registered in the AA network includes banks, non-banking financial companies, asset management companies, depository, depository participants, insurance companies, and pension funds.
“The Department of Revenue shall be the regulator of GSTN for this specific purpose and Goods and Services Tax (GST) Returns, viz. Form GSTR-1 and Form GSTR-3B, shall be the financial information,” the Reserve Bank had said in its circular last year.
Bengaluru-based IT services firms Infosys and Wipro, India’s second and fourth largest IT companies respectively, are two companies that have been working with the GSTN as technology service providers.
The two companies did not respond to ET till press time on whether they were enabling the GSTN in going live on AA, and whether there was a delay in going live.
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