Union Budget 2018-19: Invoice Discounting Platforms Can Access MSME's GSTIN Data For Authenticity
Late payment is one of the major problems among the MSMEs, especially in the manufacturing sector as their working capital is out of the system
With enormous data created post the implementation of the GST, Finance Minister Arun Jaitley while presenting the Union Budget 2017-18 said the Trade Receivables Discounting System (TReDs) platform could use the GSTIN data to address the MSMEs credit owes.
Late payment is one of the major problems among the MSMEs, especially in the manufacturing sector as their working capital is out of the system. With the TreDs platform, these companies can trade their invoices as collateral with financial institutions or a bank on lower than the receivables or in other words discount the bills.
Manish Lunia, Co-Founder of Flexiloans.com said, "This for the first time, the government has recognized the importance of Fintech players in expanding the MSME lending ecosystem."
“Linking of GSTN with receivables financing is a big step for MSMEs in the financing space. Additionally, the government is going to give every business in India a unique business id and that's going to bring so much live data and information,” he added.
In a conversation with Entrepreneur India, Kalyan Basu, CEO, A.TReDs welcomed the announcement by the finance minister and said the move will not just help MSMEs fund their working capital needs but also, help platforms like Invoicemart to ease the whole invoice discounting process.
“With access to GSTIN data, TReDs and financing institution can check the authenticity of the invoice. Also, we can work out on a system where the MSMEs can directly access their GST data so that there no chance of any duplication or the time consumed is lesser in the process,” he shared.
In 2016, Reserve Bank of India released licenses to Small Industries Development Bank of India, AXIS Bank and Mynd Solutions to host TreDs platform.
SIDBI in a joint venture with National Stock Exchange (NSE) started Receivables Exchange of India Ltd (RXIL) while Axis Bank collaborated with Mi Junction to start A.Treds, which hosts Invoicemart platform.
Meanwhile, Mynd’s M1 TReDs is not just into receivables factoring but also around reverse factoring, which leads to higher transaction volumes coming into the system thus facilitating better pricing. Other digital lenders that allow SMEs to discount their bills are Kredex, Priority Vendor and Flexi Loans.