According to India Ratings report, introduction of GST would hurt companies’ liquidity and working capital cycle in the short-term period. The firms will face a major disruption post GST implementation which requires easy liquidity to minimise the effect of the said disruption.
The report further added that companies with a strong credit profile will not face any severe disruption to their working capital cycle however, that may not be the case for companies not having a robust credit profile.
The report evaluated 11,000 firms in its study and found that Rs. 1 lakh crore could be tied in input credit of which half i.e. Rs. 50,000 crore could be blocked for a period of two months, putting additional strain on the working capital needs of these firms.