The value in the application of GST-related data to lend is well-established in particular in the case of lending to small-sized companies. The accessibility of data via APIs, the reliability, accuracy, and authenticity of the data sources i.e. the GST system is what makes it the perfect option for large-scale electronic lending programs.
Smaller businesses are usually in need of money to support their daily activities as well as for capital expenditure. However, historically, they have been underserved due to the cost of acquisition and service. But a totally digital loan journey is a complete change in the rules. With a digital-first approach, GST data, along with other frameworks that are emerging, like Account Aggregators and Account Aggregators, make the evaluation of credit and underwriting more efficient and complete.
GST Data is vast and there are steps that need to follow to achieve the same data for underwriting applications. It is essential to know the more intricate aspects of GST Data as they could directly or indirectly impact the way the digital lending process is designed and how underwriting models are defined.
Here are a few points to keep in mind while reading GST data to lend
GST data can be classified into two kinds namely, Public and Private
The GST data that is public for any GST-registered taxpayer the fundamental registration information as well as the status of the taxpayer and the date of tax returns are accessible for the public to access. The public data include information like legal name, nature of the business i.e. whether it’s a proprietorship, firm, or company, and so on. The primary location as well as any additional places from which the business is located are also available for public inspection. The filing history contains information regarding the GST returns that have been filed, their dates, and filing methods (whether via SMS, online, or otherwise.)
Privacy GST Data: Private data is comprised of information that is filed in the GST returns. It requires the taxpayer to consent. Information about invoices, vendors customers, tax liabilities, and more. are generally recorded in GST Returns. These may be filed on the basis of quarterly or monthly frequency, according to the preferences of the taxpayer. Learn more information regarding GST Information and its upcoming use cases.
Public data is an excellent source of data for screening to determine the eligibility of loans. While private data taken from GST Returns could be used to underwrite credit.
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Taxpayer’s Consent GST Data- “one-time” and recurring
The consent of the taxpayer is required to gain access to private information. For data fetching using APIs There are two kinds of consent that are required:
One-time consent through permitting API access. This implies that taxpayers’ information can be retrieved via APIs by any application, but only through the use of a GSP and only after a secure session has been established through OTP. If API access is enabled, no apps are authorized to obtain the information, not even GSPs. After setting up API access for taxpayers, they are able to set the length of the secured session. The duration of the session may be set to either six hours or 30 days. The duration is applicable for a continuous period. OTP Based consent on the basis of the need
Enabling API access doesn’t mean that your data will be pulled from any software. In order to access data from the GST system or to send data, the authenticity of taxpayers’ and taxpayers’ systems must be verified. This will prevent fraud and also keeps out unauthorized access.
OTP is delivered to the address registered on the GST Portal. Once the authenticity of an applicant and the taxpayer person submitting the application is confirmed via OTP Any interaction with the GST system can be carried out for the period set for a secured session. When the timer expires it is necessary for a new session to be established using OTP. Find out more aspects to be considered when designing the Credit models
It helps to keep an eye on fraudulent GST bills and ITC claims
To ensure that there are no fraudulent GST invoices and ITC demands GST Returns and taxpayers’ actions are controlled by the government. If there are any anomalies, they can result in a temporary suspension or cancellation of the GSTIN. Taxpayers are also receiving notices about discrepancies with the information that is reported on GST returns. These, too, could result in a change to their GSTIN status until the issue isn’t clarified and solved.
With the help of public records from public records, one can find out what is the current status of GSTIN but the motive of the GSTIN or the reason it occurred initiated by self or a result of a regulatory decision such as temporary, etc. isn’t clear.
The filing status could change in a matter of minutes after filing without having a trail. Thus, lenders must be aware that even when they only have active GSTINs are considered in the process of evaluating however, they should be aware of any changes in status afterward. Failure to comply could lead to the risk of default or delay in payments.
Everything is GSTIN-compliant
Data or consent Any interaction with the GST system takes place at the GSTIN level. A crucial point to keep in mind is that under the GST regulations, businesses must choose to register at the state level. So, a business (say possessing PAN) might be registered in more than one GSTIN registered in different states and even in the state of origin. could have multiple GSTINs for various sectors of business.
Although it is not possible to determine if the PAN has multiple GST registrations received, it’s reasonable to presume that small-sized businesses will likely be registered for GST on a single basis.
It is nevertheless important to determine the number of registrations accepted by the company and, more importantly, the degree to which they’re compliant. Utilizing public data alone provides a comprehensive view of the business is possible like we have done with the Peridot Compliance Report.
Be aware of GSTIN status
GST Data APIs are flexible in the sense that they are modular. In order to make optimal API calls it is crucial to determine prior to time what information to ask for. The availability of GST information is dependent on factors like:
GST Registration Type GST Registration type The tax returns that must be filed by taxpayers is determined by the nature of their registration. The majority of taxpayers who are registered as a normal or regular type have to submit GSTR 1. They also need to file GSTR3B. The remaining 13% have chosen to compose, and are currently filing CMP 08. The remaining registration options are those that are specific to the type of operation like e-commerce, ISD, etc.
Filing Frequency To make it easier to report for small-sized businesses’ annual returns, quarterly and monthly payment plans are introduced at times. Prior to December 2020, it was GSTR 1 which was able to be filed annually, whereas starting in January 2021 the two GSTR 1, as well as 3B, will be filed every quarter. The filing preference may change each quarter and the determined by publicly available data.
Returns that have been filed Although the registration type and frequency will indicate the type of returns expected and at what frequency, however, the information is accessible only after returns were filed. The filing history contains information about Returns that have been filed that is used in determining what data to be retrieved.
It is beneficial to study the profiles of borrowers prior to making the decision about the GST information to request instead of establishing a blanket policy for all profiles of borrowers.
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