The induction of the Goods and Services Tax Network (GSTN) on the Account Aggregator framework is expected to add another dimension to underwriting for small businesses. Underwriters process various categories of financial information to arrive at a comprehensive overview of a borrower’s creditworthiness.  

So far, Account Aggregator has been widely used for fetching and analysing bank statement data . With GSTN onboarded as a financial information provider (FIP), tax data can also be fetched with similar ease. 

Why GST on AA is a good fit 

GSTN on Account Aggregator can provide lenders with various types of information for risk assessment.  

Profile details 

GSTN includes profile details like the legal name of the business, trade name under GST, business address, nature of the business and PAN information among other details. This information can be fetched through AA for underwriting purposes.  

Return filing details 

Currently, GSTN information available on Account Aggregator includes information submitted by the taxpayer as part of the GSTR-1 (table 4) and GSTR-3B. GSTR-1 data includes the monthly or quarterly statements of the business’ outward supplies.   

GSTR-3B is a monthly form filed by the taxpayer in addition to GSTR 1 and 2. It includes a self-declared summary of their GST liabilities for a tax period. Information around taxes already paid and payable, the input tax credit availed, delayed tax filing, and any late fees or interest can be accessed for risk assessment. Underwriters can use this data around revenue and costs to match with cash flow data from the company’s financial statements.  

Data access period and frequency 

GSTN allows Account Aggregators to access up to 18 months of data. Lenders developing user journeys for business loans can fetch GST data through recurring consent . This could allow them to align monitoring of customer activities with their return filing frequency.  Recurring consent to fetch GST data would allow lenders to create early warning systems to flag defaults and delinquencies and take corrective measures through tailored communication to avert such an eventuality.  

Business lending beyond sole proprietorship  

The existing Account Aggregator schema for current accounts allows only sole proprietorship businesses to seek loans. With the introduction of GSTN, small businesses listed as partnerships, private limited companies, and LLPs can now apply for business loans and their financials assessed through GST data. 

Risk assessment through a wide range of predictors  

GSTN on Account Aggregator can allow lenders to conduct risk assessment on a number of additional monetary predictors like gross turnover, tax paid, and outward and inward taxable supplies. Lenders may also get a sense of business stability and wallet share by analysing the number of business clients, the number of months for which GST has been filed, and the maximum single party transaction.  

GSTN data can also add more depth to the assessment of intent and ability to repay by allowing insight into the total penalty paid, counts of late returns filed, days delayed, interest paid, EMI affordability, and preferred NACH dates. 

 Conclusion 

Account Aggregator, especially in conjunction with alternative data, has been game-changing for digital lending. Information sourced from Account Aggregators can supplement alternative data insights to offer a holistic view of a customer’s credit profile. With GSTN in the mix, data fetched from Account Aggregators can become richer, allowing underwriters to view a given credit profile from various vantage points. 

As more non-banking FIPs are onboarded on the Account Aggregator ecosystem, it will be instrumental in rounding out underwriting for digital lending and create opportunities to build a number of use cases. 

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