Ending GST in the services of microfinance companies: wish list of the industry budget

NEW DELHI: the Sa-Dhan microfinance industry agency on your wish list for Budget 2020-21 urged the government to eliminate the tax on goods and services (GST) on services provided by the sector.

Highlighting the key demands, Sa-Dhan's chief executive, P Satish, said: The MFIs (microfinance institutions) offer different services to microfinance clients and we ask the government of India to have the Goods and Services Tax (GST) ) is eliminated (in services) as it is a service for the low-income segment of the population.

Sa-Dhan said the additional tax burden is currently applied to these low-income clients, which is counterproductive to the government's policy on financial inclusion.

There is no GST in bank loans, therefore, the same should not apply to loans taken from MFIs, Satish said on the MFI's wish list.

Among others, the industry expects the Budget to help accelerate loans from public sector banks to MFIs. In a gradual slowdown, in 2018-19, it was reduced to 12 percent of the overall indebtedness of 22 percent in 2017-18. We ask the finance minister to reinforce the plans for an adequate fund for PSB to be used for the microfinance sector.

It has also requested greater budget allocations from Nabard, Sidbi and its subsidiaries to increase loans to MFIs.

The Financial Inclusion Fund of Rs.2 billion is currently available to commercial banks, RRB and some other institutions. Since microfinance institutions (MFIs) reach such a vulnerable section of the population served and not served, we ask the government to allow MFIs to use this fund, Sa-Dhan said.

He also requested a special fund for the sector's self-regulation organization (SRO) and said that the allocation of funds through RBI to the SROs will help spread awareness and conduct workshops for the microfinance sector.

According to Sa-Dhan data, the loan portfolio of all these lenders was Rs 1.99,441 rupees as of September 30, 2019.