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Know How You Loan Based On Your GST Returns

Updated: Jan 4

Did you know that a person can avail loan against GST Returns? Interesting, right!?

A borrower can avail loan against its GST Returns from banks and Financial Institutions provided the borrower passes the eligibility criteria of the lending institution.

Each and every bank has its own eligibility criteria. For instance:

Tata Capital

  • Borrower must own a sole proprietorship firm or partnership firm or public ltd company or private limited company OR borrower is a retailer, wholesaler, import or export trader or self-employed AND

  • Business must be running for at least one year prior applying for loan AND

  • Business must have total sales of Rs 2 lakh.

Axis Bank

  • Business has been established for at least 3 years AND

  • Borrower is 21 years or older at the time of making application for loan but at the same time 65 years or younger at the end of loan tenure. AND

  • Minimum income is Rs 3 lakh for both years AND

  • Borrower owns either a residential property or office.

Central Bank of India

  • Borrower can be Individual, Proprietor, Partners, Companies (Public or Private), LLPs etc (except HUF and Trust) who are registered under GST AND

  • Borrower has Udhyam Registration Certificate for working Capital needs.

  • CC Facility of Rs 10 Lakhs to Rs 5 Crore

Features of GST Loans

1. Collateral: Few Banks Provide GST Loan without Collateral or on basis of CGTSME Gurantee Cover

2. Interest Rate: Interest rates offered in GST Loan are highly competitive and affordable.

3. Tenure: GST loan can be availed for short term as well as long term.

4. Basis of approval: Lender approves the loan on the basis of business and its performance such as turnover, creditworthiness and liquidity & solvency position.

5. Tax Benefits: Tax deduction can be claimed for interest paid on GST loans. However, it is advised to consult a tax professional before applying.

6. Loan Amount: Borrower can enhance the loan amount later on. Though approval is required by lender. For detailed information about the extension of loan amount, borrower needs to enquire with the lender.

GST Loan can be taken when borrower:

1. Wishes to raise funds while ensuring control over business OR

2. Needs funds on an immediate basis OR

3. Is raising funds for purposes such as business expansion, working capital and debt consolidation.

Interest Rate charged on GST loan

Interest rate varies from case to case based on several factors such as Loan Amount, financial position of business, tenure and so forth. Here is the list of interest rate charged by top lenders for business loans:

HDFC Bank: 10% - 22.50%

IDFC First Bank: 10.50% pa onwards

Axis Bank: 10.75% pa onwards

Indian Bank: Repo Rate plus 5.35%

How to apply for GST Loan?

  1. Choose a lender: Research and compare lenders based on interest rate, loan amount and terms & conditions.

  2. Eligibility criteria: Check eligibility criteria of the chosen lender. Also, prepare the documentation accordingly such as GST Returns, Pan Card, bank statements & so on.

  3. Submit application: A borrower can apply for GST Loan via online or offline mode. In offline mode, borrower can visit the branch of bank, collect and fill the application form. After that submit the form with the required documents in the bank. In online mode, go to the bank’s website and fill the necessary details and upload the documents and finally submit the form.

  4. Loan Agreement: Once the application gets approved by the lender, borrower will sign a loan agreement with the lender which will state all the details about the loan such as loan amount, interest rate etc.

  5. Disbursement of Loan Amount: Finally, the amount will be disbursed to the borrower’s bank account.

For other interesting conceptual topics please visit our other contents:

All About Working Capital Loan:

Lease Rental Discounting:


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