To provide quality education, private schools in India must have cutting-edge infrastructure and well-planned facilities. This is even more important now because the generation currently in schools is growing in an environment of mobile computing devices and e-commerce. Since private institutions are entirely dependent on their own earnings to improve their campus, they may need school loans to finance such expenses.
Let us look at the top reasons that drive schools towards taking loans from banks and NBFCs:
1. To construct a new school building
Loan for construction of school building is commonly sought by institutions that are successfully providing education services but need more classrooms to accommodate the increasing number of students. Adding more sections for each grade is also a good idea when schools are focused on keeping a low student:teacher ratio.
2. To build a playground/sports court
School loans may also be required to add a playground, basketball courts, tennis courts or rooms for indoor sports. Games are an essential part of school education, and if a small unsecured loan from an institutional lender can help to build a beautiful playing field, the investment is worthwhile.
3. To develop a laboratory
Schools need to have well-equipped labs for practical experiments concerning physics, chemistry, biology and to give students hands-on experience with computer studies. Some private schools are also required to have Home Science labs as per the curriculum for their students. A quick loan for school laboratory can be procured at easy terms from a FinTech lending company. Such lenders usually provide up to Rs 50 lakhs on loan for building school laboratory.
4. To buy furniture for classrooms, staffroom
A simple reason to apply for a loan could be the purchase of new or additional furniture for students and staff. The cost of ergonomic desks and chairs may not be within the budget of the school, and financial support from a FinTech company can come in handy.
5. To purchase commercial vehicles
Schools that provide transportation services to their students and staff may need to buy new buses or vans. If adequate finance is not available for such purchases, FinTech lenders can offer simple digital modes to provide unsecured loans with flexible repayment options.
6. To build or improve a library
Well-stocked libraries are essential components of any school’s infrastructure. A school that has been running successfully for some time, but does not have a library, can borrow funds from school loan companies to build a quality library on its campus. Unsecured school loans can also be taken to buy stocks of new books that are too expensive to purchase in the available library budget.
7. To start a new facility on premises – stationery/canteen/uniform shop
Private schools try to offer all the essential facilities for the convenience of students. If there is a stationery unit on the campus, students can purchase prescribed textbooks and other essential items without having to visit markets. A shop for summer and winter uniforms makes it easy to buy the exact uniform as required by the school. While canteens are not “must-haves”, they are good to provide hygienic menu options to the students and staff. School loans may be taken to fund such facilities.
8. For repairs and renovation
A school that already has structures or facilities for education and sports may also need a loan to repair, renovate and improve them. It can digitally apply for such funds on a FinTech company’s website.
9. To purchase new teaching devices, audio-visual equipment
School loans fund the purchase of interactive teaching devices that are becoming increasingly important in the digital age. Educational institutions can borrow to install whiteboards, overhead projectors and other audio-visual teaching aids to make learning more interesting for their students.
10. To add/improve day-boarding facilities
Some private schools offer day-boarding amenities to their students. As a part of this facility, they need to provide healthy meals and areas for rest and recreation. To build and improve such environment, they may need loans that are offered most conveniently from FinTech companies.
As a leading digital NBFC offering loans to educational institutions, Capital Float funds all such requirements of schools in India. To know more about our financing products, feel free to call us on 1860 419 0999.
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Oct 24, 2018
With the Goods and Services Tax (GST) set to roll out on July 01, 2017, expectations and anxieties are high with individual taxpayers and businesses trying to gear up for a brand new tax regime.
Components of GST
To be able to make the most of the new indirect taxation law, taxpayers need to understand its components well.
The GST Council which was set up by the Central Government to execute GST implementation, has proposed a new tax framework-structure for GST.
First and foremost, GST represents a “One Nation, One Tax” outlook, which is necessary to do away with multi-tax regimes that lead to inefficiencies such as cascading taxes, levy of excise at the point of manufacturing and lack of uniformity in tax levies. Currently, Goods and Services are taxed under various disparate tax categories such as Excise Duty, VAT or Central Sales Tax, Service Tax (in the case of services dispensed) and Customs Duty (for imports). Some of these taxes are levied by the Central government, and others by the state government. A unified approach— GST— will help do away with these complexities by enabling a single tax regime right from manufacturer to consumer. It is important to know that GST is a destination-based tax i.e., the tax is credited to the taxation authority whose jurisdiction prevails at the place of consumption (also called the place of supply). Moreover, GST will be levied on value-addition, by allowing for input tax credit at each stage of the transaction chain.
GST will have four slabs of indirect taxation: 5%, 12%, 18% and 28%, with goods and services attracting any of these slab percentages depending on various factors such as being a luxury good/service. The current indirect tax structure will give way to a Dual GST model, with the Centre and States simultaneously levying GST on a common tax base, as follows:
- Central GST Bill (CGST): For intra-state transactions related to supply of goods and/or services, levied by the Centre.
- State or Union Territory GST Bill (SGST or UTGST): For the supply of goods and/or services in the States and Union Territories, levied by the States/Union Territories.
- Integrated GST Bill (IGST): For inter-state transactions and imports related to supply of goods and/or services, carried out by the Centre.
Under this structure, the CGST and SGST/UTGST will be levied simultaneously on the same price or value. Here is an example of how this will happen: Consider a steel supplier who manufactures in Jharkhand and supplies steel to another company within Jharkhand. Let us assume the rate of CGST to be 10% and SGST to be 7% and the selling price of the steel to be Rs. 100. The supplier will charge the client a CGST of Rs 10 and SGST of Rs 7. The supplier needs to deposit Rs 10 in his Centre taxation account, and Rs. 7 in the State taxation account. Due to input credit facility, the supplier has the option of setting off the total payment (Rs 17) against the tax he paid on his purchases or inputs. However, these credit values cannot be mixed—for CGST-setoffs he can utilize only the CGST credit; for SGST-setoffs he can utilize only SGST credit.
A Dual-GST is particularly suitable for the Indian economy because in India both the Centre and States are assigned the duty of levying and collecting taxes. So far, the Constitution clearly demarcated the tax levying and collection duties of the Centre and State, with the Centre responsible for taxing the manufacture of goods, and the State responsible for taxing the sale of goods. For services, only the Centre was allowed to levy Service Tax. To override this segregation of power, and enable the smooth implementation of GST, a Constitutional amendment (Constitution Act, 2016) was made so as to simultaneously empower the Centre and the States to levy and collect this tax. With this amendment, the Dual GST regime will now align well with the fiscal federal protocols of India.
Taxes subsumed under GST
The following are the disparate taxes (levied by the Centre and States) which will be subsumed under the new dual-GST regime.
(A) Taxes currently levied and collected by the Centre:
- Central Excise Duty
- Duties of Excise (Medicinal and Toilet Preparations)
- Additional Duties of Excise (Goods of Special Importance)
- Additional Duties of Excise (Textiles and Textile Products)
- Additional Duties of Customs (commonly known as CVD)
- Special Additional Duty of Customs (SAD)
- Service Tax
- Central Surcharges and Cesses so far as they relate to supply of goods and services
(B) Taxes currently levied and collected by the States:
- State VAT
- Central Sales Tax
- Luxury Tax
- Entry Tax (all forms)
- Entertainment and Amusement Tax (except when levied by the local bodies)
- Taxes on advertisements
- Purchase Tax
- Taxes on lotteries, betting and gambling
- State Surcharges and Cesses so far as they relate to supply of goods and services
The taxes to be subsumed were decided after intense debate and consideration of some core principles that were in line with the GST ethos. Each tax was first examined to ensure it qualified for indirect taxation and was related to the supply of goods or services. Moreover, a tax which was to be subsumed needed to be part of the transaction chain right from imports through manufacturing to the provision of services and the consumption of goods/services. Another important criteria to allow a tax to be subsumed was that the subsumation should lead to free flow of tax credit at Intra- and inter-State levels. Also, the revenue considerations of both the Centre and the State were taken into perspective while arriving at the final list of subsumed taxes.
Clearly, the change is huge, and the sooner consumers and businesses get familiar with the implications on Term finances, the better they will be equipped to benefit from the new GST reforms.
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Oct 24, 2018
Supply chain finance is an important but often underrated aspect of supply chain management. At its core, supply chain management is the management of the flow of material / services, data and money through a network of assets from the point of origin to the point of final consumption (and back). Natural disasters, geo-political crisis and financial crisis faced by the world over the past decade have forced companies to move away from only optimizing their supply chains to making them more resilient. For a supply chain to be truly resilient, all risks associated with the asset base managing the flow (i.e. the material & services, data and money) must be negotiated intelligently, keeping in mind that each one represents a point of failure or a point of opportunity.
Industries are habituated to ignore the significance of supply chain financing. While there has been a lot of collaboration between different constituents of supply chains, they usually center on inventory. However inventory and finance are intrinsically linked; increased players in the supply chain machinery is directly proportionate to the increased complexity in the financing of the process. This is especially true in a country like India, where the number of intermediaries, in many cases outnumbering the actual value addition points, poses a complex problem from the paradigm of supply chain finance and more importantly supply chain resiliency.
As with anything in a complex supply chain, the bulk of the power resides in a few constituents (maybe the retailer or the manufacturer depending upon the specifics of the value chain). These companies understandably look out for their own interests especially when it comes to supply chain finance. Though concepts like JIT (just in time) inventory and quick turnaround times from order-to-delivery have reduced inventory levels held drastically, most companies still hold onto the traditional 30-45-60 day of credit terms with their suppliers. This puts incredible financial stress on the supplier which in the worst case manifests in poor quality of supply. In the long run, this increases the total cost of ownership for the company, i.e. investment in more stringent QC processes, returns, disruption to the manufacturing process, supplier switching costs etc. Applying the same principles of collaborative thinking to supply chain finance will not only make the overall chain more resilient but also optimize the flows and pass on efficiencies in the long run to the end consumer.
In today’s business environment where “share holder value” is no longer a buzz word but the focus of every corporate board of directors, it might be wishful thinking to expect companies to share their margins or reduce days of credit to suppliers in the interest of collaboration. This is where a third party financial institution plays an important role. By providing liquidity to the supplier on the basis of the credit umbrella provided by the bigger company, the addition of the third party financial institution creates a win-win across all stakeholders involved. This is even more critical in the case of small and medium sized enterprises, which at this point are forced to spend only a fraction of their efforts on innovation and growth.
While some large corporates do have some form of supplier financing initiatives through tie ups with Banks and NBFCs, in most cases the coverage of the initiatives are limited (to some marquee suppliers) and in a larger amount of cases are a generic form of receivable financing based on existing credit policies of the financial institutions, which are out of sync with business realities. It is imperative for large corporates to have a supplier financing initiative for all their suppliers, especially the SMEs to manage their financial risks. In turn it is imperative for the financial institution to have a tailored product which reflects the operating realities of the industry and also the specificity of the supply chain. Collaboration of all three stakeholders, i.e. the large corporate, SME supplier and financial institution will be critical to ensuring a sustainable supply chain finance program.
We live in an interconnected world; therefore large corporates have the responsibility to ensure that their SME suppliers have access to finance, if they truly want to make their supply chains resilient.
Prashant has 11 years of experience in business strategy and operations, with specific expertise in the areas of project management, supply chain management and business process formulation , across the retail sector, United Nations system & international organizations, telecommunications & high technology, oil & gas and 3rd party logistics. He has successfully managed and delivered projects for clients based out of Europe, the USA, Africa and India.
At Capital Float, Prashant heads Business Development for Supply Chain Financing.
Oct 24, 2018