GST COMPLIANCE AND ECONOMIC FORMALIZATION: A STUDY OF INDIA'S INFORMAL SECTOR TRANSFORMATION

The implementation of GST has significantly influenced the transition of businesses from informal to formal systems in India. Through mechanisms such as digital compliance, input tax credit incentives, and supply chain transparency, GST has encouraged enterprises to adopt formal business practices. Although challenges related to awareness, technology, compliance costs, and regulatory complexity persist, the benefits of formalization outweigh these difficulties. Improved access to finance, enhanced business credibility, expanded market opportunities, and greater economic transparency are among the key advantages of GST-driven formalization. To maximize the effectiveness of GST in promoting formalization, policymakers should focus on simplifying compliance procedures, strengthening digital infrastructure, and supporting small enterprises through education and capacity-building initiatives. Such measures will contribute to sustainable economic development and strengthen India's formal economic ecosystem.

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