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Despite concerns over the implementation of GST, the monthly collection ratios of loan pools of commercial vehicles (CVs), loan against property (LAP) and MSMEs remained strong at 95-99 per cent in July and August, says a report. Since the rollout of the Goods and Services Tax from July 1, there have been reports about temporary disruptions in the performance of these loans as borrowers have been working overtime to make their businesses GST compliant on one hand and their working capital cycle getting stretched on the other, says the report of Icra. The observed collection efficiencies are largely in line with the levels witnessed during the previous few quarters, it noted. "While these are still early days, the initial performance suggests that the rated pools are demonstrating remarkable resilience. The monthly collection ratios at a median level in July and August have remained strong at 95-99 per cent for CV, LAP and MSME loan pools," Icra's structured finance head Vibhor Mittal said. He said there has been a small increase of 30-50 basis points in 30+ delinquency levels during this period for CV and LAP asset classes.
But delinquencies in the MSME segment have only come down. The report said for the CV industry, the GST is likely to have a positive impact in the medium to long term. "For transporters plying in some sectors, the vehicle transit time has come down due to the removal of check posts at state borders. The deferment of e-way bill implementation has also helped," Mittal said. He said the ability of small road transporters to cope with the e-way bill requirement once it is rolled out and the corresponding rise in operational cost, remains to be seen. For MSME loans, many borrowers are either outside the GST ambit or have complied with GST under the composition scheme, where tax rates are marginal and compliance requirements are significantly lower, he said, adding "these borrowers are likely to see minimal impact on businesses." The agency said for the larger ticket loans offered in the MSME and the LAP segment, the government has extended the return filing dates which has provided an interim relief. The compliance costs for some of these businesses may go up. As borrowers are forced to report their true income, their margins may also get suppressed owing to higher income tax levy, the report said. In the long-term, the entities that are able to face the interim challenges will become part of a stronger marketplace, it added. "These entities will then be able to reap the benefits of GST--lower indirect tax burden, better logistics, and the end of goods and services distinction," Mittal said.