Advanced International Journal for Research

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Reforming the Indirect Tax Landscape: An Empirical Study on the Impact of Goods and Services Tax on Micro, Small and Medium Enterprises in India

Author(s) Mr. Deepak Maurya, Dr. Karthik J P
Country India
Abstract The introduction of the Goods and Services Tax (GST) in India on 1 July 2017 represents the most significant overhaul of indirect taxation since independence, replacing a fragmented system of central and state levies with a unified, technology-driven regime built on the principle of "one nation, one tax." Micro, Small and Medium Enterprises (MSMEs), which contribute nearly 30 percent of GDP, 45 percent of manufacturing output, and 40 percent of total exports while employing over 110 million people, sit at the centre of this transformation. This paper examines how GST has reshaped the operating environment for MSMEs by drawing on secondary sources from the Ministry of MSME, the GST Council, CBIC, and RBI, and by triangulating these with primary field responses collected from ten MSME units in Gangtok, East Sikkim. The findings indicate that GST has simplified registration and return filing, eliminated the cascading effect of multiple indirect taxes, lowered effective tax rates for several categories of goods, and enabled seamless interstate trade through the e-way bill and input tax credit mechanisms. At the same time, the study documents a set of persistent frictions, including higher compliance costs in the early transition period, working capital pressure arising from delayed refunds, digital-literacy gaps in smaller units, and ambiguity in classification across GST slabs. The paper argues that while GST has delivered meaningful gains for a majority of MSMEs, the next phase of reform must focus on procedural simplification, faster refunds, expanded Composition Scheme coverage, and targeted capacity building so that the benefits of formalisation reach the smallest enterprises.
Keywords Goods and Services Tax, MSMEs, Indirect Taxation, Input Tax Credit, Tax Compliance, Formalisation
Field Business Administration
Published In Volume 7, Issue 2, March-April 2026
Published On 2026-04-23
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E-ISSN 3048-7641
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