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The transition to GST will disrupt the working capital cycle of businesses in the initial phase and thus easy liquidity in the system is essential for two to four months, says India Ratings and Research (Ind-Ra). The agency believes that in order to minimise the magnitude of such disruption at the earliest, and to absorb the sudden changes in requirement of short term finance, easy system liquidity is necessary.
Ind-Ra studied a sample set of 11,000 corporate and estimates that the input credit lock up for this sample could be around INR 1 trillion of which about INR 500 billion could be blocked for about two months which may result in higher short term working capital requirement for businesses in the near termite of India Inc.
The transition to GST will disrupt the working capital cycle of businesses in the initial phase and thus easy liquidity in the system is essential for two to four months, says India Ratings and Research (Ind-Ra). The agency believes that in order to minimise the magnitude of such disruption at the earliest, and to absorb the sudden changes in requirement of short term finance, easy system liquidity is necessary.
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