Why Filing GST Returns Is Crucial for Eligible MSMEs

For Micro, Small and Medium Enterprises (MSMEs), access to finance is essential for growth. Whether you need funds for working capital, expansion or equipment purchase, timely credit can make a huge difference.

But one of the most overlooked factors in MSME Loan approval is GST return filing. In 2025, lenders are placing increased importance on verified GST data to assess creditworthiness and business health.

Here is why your GST return history could determine whether your MSME Loan is approved.

What Are GST Returns?

Goods and Services Tax (GST) returns are periodic filings that record the sales, purchases, tax collected and tax paid by your business. Registered MSMEs must file these returns monthly, quarterly or annually based on turnover.

There are several types of GST returns, including:

• GSTR-1: Records outward supplies (sales)
• GSTR-3B: Summarised monthly return for tax payment
• GSTR-9: Annual return

Timely and accurate filing ensures your tax compliance and builds trust with stakeholders ,including lenders.

Also Read: Different Types of GST in India explained with examples

Why Lenders Care About GST Returns

Lenders use GST returns as a reliable source of income validation and business consistency. Here is what they assess:

1. Turnover Verification

GST returns help validate your declared turnover without relying only on ITRs or sales reports.

2. Income Stability

Regular filings reflect consistent business activity and revenue flow.

3. Tax Compliance

On-time GST filing signals that your business is organised, compliant and low risk.

4. Sector Insights

Based on GST codes, lenders also evaluate your business segment, risk profile and growth potential.

5. Loan Right-Sizing

Lenders use GST data to determine how much funding your business can handle based on actual revenue.

Consequences of Not Filing GST on Time

Failing to file GST returns regularly or accurately can lead to:

• Rejection of loan application
• Higher interest rates or reduced loan limits
• Difficulty in establishing turnover and eligibility
• Penalties and late fees from tax authorities
• Loss of government benefits or subsidies linked to GST compliance

Also Read: Top MSME GST Loan Scheme

How to Stay Compliant

• File GSTR-1 and GSTR-3B on time every month
• Reconcile data before submission to avoid mismatches
• Keep digital copies of your filings as part of loan documentation
• Use accounting software or hire a tax consultant if required
• Ensure your Udyam Registration and GST records match

Final Thoughts

In 2025, your GST return record is not just a tax formality, it is a gateway to better credit access. MSMEs that stay compliant are more likely to receive faster approvals, better terms and higher loan amounts.

If you are planning to apply for a business loan, start by ensuring your GST returns are filed accurately and on time. At Godrej Capital, we support MSMEs with transparent finance solutions that reward good compliance practices.

Apply now for an MSME Loan.

FAQs

Q.1. Is GST registration mandatory for an MSME loan?

It depends on the lender. However, having GST records strengthens your application significantly.

Q.2. What period of GST returns do lenders check?

Most lenders review returns from the last 12 months, sometimes up to 24 months.

Q.3. Can I apply for a loan without GST returns?

A. Yes, but your approval chances and loan amount may be lower without GST proof.

Q.4. What happens if there are discrepancies in filings?

A. Mismatches or delays may lead to further scrutiny or application delays.

Q.5. Do lenders access GST returns directly?

A. With borrower consent, many lenders can access GST data via authorised APIs.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com