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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM64521
Volume:
10 |
6 |
Jun 2026
Pages:
1--
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
Management
G L Bajaj Institute of Management and Research, Greater Noida
The Goods and Services Tax (GST) was launched in India in July 2017, and was designed as a major change in the indirect tax system, bringing it together under one roof for India. Although the reform has made tremendous progress in the formalisation of the economy, and removed cascading tax impacts, the effect has been far from uniform or consistent in relation to Micro, Small and Medium Enterprises (MSMEs). Despite the MSMEs' significant contribution to the Indian economy, contributing around 29-30% to GDP, more than 26 crore of people are employed in this sector, and nearly 45.73% of the exports in FY 2023-24 happen from this sector, there are still many compliance burdens faced by the MSMEs. This paper explores, in the light of secondary data and literature, the various compliance issues that are faced by MSMEs in the implementation of GST – such as the complexity of GST returns, inverted duty structure, delayed ITC refunds, the lack of digital infrastructure and the high compliance cost. It also reviews the latest policy measures and any new measures that have been undertaken to simplify under the GST 2.0 regime and offers targeted suggestions for developing a more MSME-friendly tax system.
KEYWORDS
India's original Goods and Services Tax (GST) design was a tough compliance burden for the MSME sector, exacerbated by structural hurdles like inadequate online access, resource limitations, multi-rate complexity, and the matching ITC-based invoice system, which is incompatible with the informal supply chain landscape. GST 2.0 is a massive shift back 9 years after the introduction, where rationalisation of rates, accounts for automation and streamlining of registration are making a difference in the right direction. But the work is by no means done. GST will remain a burden rather than a blessing for MSME exporters as long as they do spend a part of their manpower on tax compliance, as long as they wait for the refunds to utilize working capital of the business, as long as they are disenfranchised systematically from the compliance ecosystem by digital exclusion in rural and semi-urban areas. The recommendations contained in this paper (are not) costly and cumbersome to implement, nor are they radical overhauls of the system. They need specific reforms based on evidence and science that recognise the diversity of the Indian MSME ecosystem and consider the challenges of small business tax compliance. It is not just an issue of tax administration, but is a crucial issue in keeping India's quest to a $5 trillion economy with small business thriving and inclusive growth in the economy.
Binary Semantics. (2025, December). GST Compliance for SMEs in India: Growing Pains, Tech Levers, and the Future Ahead. Retrieved from www.binarysemantics.com CA Rajput & Associates (RJA). (2026, January). Critical Concerns Faced by MSMEs & Exporters under GST. Retrieved from carajput.com Central Board of Indirect Taxes and Customs (CBIC). (2025, April). Guidelines for Streamlining GST Registration Process. Government of India. ClearTax. (2026). GST Reforms in India: New Rates, Slabs and Key Changes in 2025. Retrieved from cleartax.in Deloitte India. (2024). GST@7 Survey: MSME Perceptions and Compliance Challenges. Deloitte Touche Tohmatsu India LLP. eFileTax. (2025, January). Balancing Reform and Reality: The GST Dilemma for MSMEs. Retrieved from www.efiletax.in FLAME University. (2025, January). Balancing Reform and Reality: The GST Dilemma for MSMEs. The Wire/FLAME Media. Government of India, Ministry of MSME. (2024). Annual Report 2023-24. New Delhi: Ministry of MSME. IJCRT. (2025). A Study on the Impact of GST on MSMEs and Small Businesses in India. International Journal of Creative Research Thoughts, Vol. 13. PHDCCI (PHD Chamber of Commerce and Industry). (2025, November). How GST Reforms Are Simplifying Business for MSMEs. New Delhi: PHD Chamber. Press Information Bureau (PIB), Government of India. (2025, September). GST Reforms in MSME — Factsheet. Retrieved from pib.gov.in TaxGuru. (2025, September). GST 2.0 Reforms Simplify Compliance for MSMEs. Retrieved from taxguru.in TaxScan. (2025, June). Major GST Reforms for MSMEs: CBIC Eases Registration and Filing Under QRMP Scheme. Retrieved from taxscan.in The Economics Journal. (2025). A Study on Post-GST Compliance Perceptions and Challenges among MSMEs in India. Vol. 8(2). Udyam Registration Portal. (2024). MSME Employment and Registration Statistics. Ministry of MSME, Government of India.
Publication Date
6/4/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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The authors declare no conflict of interest related to this research work.
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