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Government Financing Schemes & Enjoy GST Benefits

The Government of India has undertaken various initiatives to boost the contribution of Micro, Small, & Medium Enterprises (MSMEs) to the GDP. Small businesses can benefit from these government schemes regarding domestic and export market promotion, among others. 

Directorate General of Commercial Intelligence and Statistics (DGCIS) informs tMSMEs have also created employment opportunities for 5.87 lakh Indians in FY 18-19 under the Prime Minister’s Employment Generation Programme (PMEGP).

hat the share of MSMEs in total exports for FY 18-19 was 48.10%. 

MSMEs can avail several government loan schemes for infrastructural development. Small scale businesses can also secure these loans by collateralising their GST returns.

Additionally, MSMEs can file for GST returns online through the GST portal login for convenience.

Government loan schemes for MSMEs

The Government of India recognises MSMEs as the backbone of the economy. Thus, to boost the growth of this sector, it offers the following schemes-

1. MUDRA Loans

Micro-Units Development and Refinance Agency or MUDRA offer loans of up to Rs.10 lakh to small businesses, manufacturers, and entrepreneurs.

Business owners can set up or expand their businesses with Mudra loans. Such credits are disbursed in the following stages-

  • Shishu caters to MSMEs which require a basic capital of Rs.50,000 to set up.
  • Kishor serves small businesses by providing up to Rs.5 lakh to convert them into enterprises.
  • Tarun helps businesses aiming for expansion by disbursing up to Rs.10 lakh under this section.

Interest rates for MUDRA loans vary between 8.40% and 12.45% as per the borrower’s credit history. Repayment tenor for such loans can vary between one and five years.

2. Credit Guarantee scheme (CGTMSE)

CGTMSE was launched in collaboration with Small Industries Development Bank of India (SIDBI) to encourage micro and small businesses to avail loans without the fear of default. It extends collateral-free loans to new or existing MSMEs.

CGTMSE covers up to Rs.2 crore and guarantees disbursement as per the following bracket: 

  • Micro Enterprises– 85% of up to Rs.5 lakh is covered.
  • Small and Medium Units– 50% of Rs.10 lakh to Rs1 crore is covered.

CGTMSE caters to industries apart from agriculture, educational and vocational training institutes, and Self Help Groups (SHGs). Business owners considering funding options to raise capital for business can opt for the CGTMSE scheme. 

Additionally, the Stand Up India scheme extends business funding to Scheduled Caste, Scheduled Tribe and woman entrepreneurs. Such loan amounts range between Rs.10 lakh and Rs.1 crore.

GST benefits for MSMEs

MSMEs benefit from the ‘one nation one tax’ structure. To increase the number of businesses operating in India, the government has taken particular measures to ease the burden of taxation on the nascent businesses under GST. 

MSMEs need to register for GST online to enjoy the benefits of this tax scheme.

  • Digital Accounting vs Out-dated Accounting

GST requires businesses to update their accounting methods from spread-sheet based techniques to modified digital accounting. It ensures financial transparency, increasing the ease of doing business for MSMEs. 

Businesses can obtain affordable interest rates with a periodically updated ledger. Digital accounting on a common platform also synchronises the accounting process all over the country.

  • Payment of a limited number of taxes

The GST structure eliminates about 17 different taxes, favouring a unitary taxation system. This feature is beneficial to MSMEs because they have to pay similar taxes across the nation. 

Businesses can thus expand their operations without worrying about tax rates in different states. MSMEs can also possess multiple registration numbers within a single state or Union Territory under the GST regime.

  • New GST filing cycle

MSMEs have to file tax returns through GST portal login every month. Previously, the productivity of businesses used to be affected during March due to the preparation for filing tax returns in April. Now, businesses have the option to file GST returns online for convenience.

Monthly filing of returns makes sure that the accounts remain updated throughout the year. The productivity of businesses also remains constant. 

MSMEs can avail financial assistance through government loan schemes to expand their businesses. These business loans can aid them significantly in the pursuit of success. With subsidised interest rates, repayment of such credit never becomes an issue as well.

The government not only looks to promote the growth of SMEs in India with such schemes but also propagate better employment for its youth. Doing so, in turn, would lead to better economic stability for the populace. 


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