CBIC notifies new data sharing mechanism on GST Portal to facilitate seamless credit

The Central Board of Indirect Taxes and Customs (CBIC) has notified the new data sharing mechanism on the GST Portal to facilitate seamless credit.

Obtaining credit from banks and other financial institutions for GST assessments would be easier, as the GST portal can now exchange data with public tech platforms for frictionless credit only with consent. Experts feel that such a step would have an influence on compliance.

According to the Finance Ministry’s notification, ‘public tech platform for frictionless credit‘ refers to an enterprise-grade open architectural information technology platform conceptualized by the RBI and created by its wholly-owned subsidiary, Reserve Bank Innovation Hub. It is designed to operate a large credit ecosystem and provide digital access to information from various data sources, with financial service providers and multiple data service providers converged on the platform via standard and protocol-driven architecture, an open and shared Application Programming Interface (API) framework.

Information in a GST return would be shared (subject to the taxpayer’s approval) with financial institutions so that they may use it to provide working capital loans, particularly to MSMEs.

A tax professional explained the decision, saying that with the supplier/recipient’s approval, GSTN is authorized to share particular details supplied in the GST registration application, as well as data from export tax returns, monthly and annual tax returns, and invoice preparations.

“This arrangement prevents borrowers from withholding any transactional information submitted to lenders or the government portal. It improves credit efficiency by lowering costs and processing times. Furthermore, lenders receive immediate access to validated monthly sales and purchase data from government-approved sources, providing for a more accurate and fast evaluation of credit risk,” he explained.

Credit sanctioning

This approach will make it easier to approve and disburse credit. According to a Tax Professional, disclosing the information “would help the lenders in making informed credit decisions with the access to transaction level sales data and better assess the credit worthiness of a prospective borrower, since the data submitted with the tax authorities would be a more reliable data point of the prospective borrower, especially due to the requirement of cross-matching.”

Another tax professional elaborated, saying that borrowers’ data, which had previously been distributed among Central and State governments, account aggregators, banks, credit information firms, digital identity authorities, and so on, could now be accessed smoothly with a single click.

Crucial data such as GST registration and sales details, returns, and so on might be made available as part of such information with the approval of relevant suppliers or recipients, allowing for consent-based data digitisation, he added.

Crucial factor

This action would also affect compliance. GST filings are expected to become a critical determinant for firms seeking financing and leveraging government-sponsored credit programmes in the future.

The use of tax-compliant data for credit choices by lenders would also result in improved GST compliance by potential borrowers because it would now be an important data point for access to credit.

This could result in an increase in innovation potential for fintech startups and improved operational capabilities for lenders.