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SME-Exporters face working capital shortage due to delayed GST
by Sandeep Muttha, October 22, 2018
Indian SME-Exporters face several challenges in the prevailing macro economic environment in India. While September exports have only marginally declined compared to the month a year ago, multiple issues plague SMEs today, which need to be addressed soon.
The policy changes to control Current Account Deficit (CAD), while good are not exactly ideal. Higher tariffs to curb imports may be a temporary stopgap to achieve the goal but is anti-capitalistic and a conservative approach. We should also focus on increasing the productivity of these SMEs to boost exports and thus reduce CAD.
The depreciating Rupee is a boon to exporters but its potential is not being realized to its fullest. The SMEs who export goods and services face delays in receiving GST refunds. As per FIEO, this stands at Rs 22,000 crores, including Rs 7,000 crores on account of IGST and Rs 15,000 crores from input tax credit. The blocked capital is impacting the working capital of the SMEs. As a result the cost of credit for exporting SMEs has increased by more than 5% in due course. Many smaller SMEs are turning to informal sources of credit at exorbitant rates to fund their working capital.
These issues need to be addressed to provide relief to SMEs by speeding up the GST refund process and providing alternatives in the meantime to ensure that the smaller businesses do not fall prey to un-organized lenders.
SMEchain is a business-financing platform with the goal to make financing for SMEs seamless and 100% digital. SMEchain helps small businesses with working capital needs by extending short-term unsecured loans. SMEs can apply for loan at multiple banks & NBFCs with a single application through our mobile & web apps. SMEs can get access to finance from within their accounting software or by connecting directly to GST