Impact of Goods and Services Tax (GST) on the Financial Performance of Micro, Small and Medium Enterprises (MSMEs) In Tamil Nadu
S YUVANRAJ 1, Dr C MEERA 2
1Student, School of Management Studies, Karpagam College of Engineering, Coimbatore, Tamil Nadu, India.
2 Professor & Director, School of Management Studies, Karpagam College of Engineering, Coimbatore, Tamil Nadu, India.
ABSTRACT
The Goods and Services Tax (GST), implemented in India on July 1, 2017, represents one of the most significant tax reforms since India's independence, subsuming over 17 central and state indirect taxes into a unified, destination-based taxation system. Micro, Small and Medium Enterprises (MSMEs), which collectively contribute approximately 30% to India's GDP, employ over 110 million people, and account for 40–45% of total exports, have been profoundly affected by this transformation. This study analyses the impact of GST on the financial performance of MSMEs in India over the period 2021–2025, using secondary financial data from five representative MSME companies. Employing trend analysis, common size analysis, comparative analysis, and profit and loss analysis, the study evaluates key financial parameters, including profitability, liquidity, cost structure, working capital management, and compliance costs. The findings reveal that while GST has imposed significant short-term compliance burdens—particularly on smaller enterprises—its long-term net financial impact is positive, with most companies demonstrating improved profitability, reduced debt, expanding asset bases, and stronger internal reserves. The study identifies digital adoption and efficient working capital management as key differentiators of GST performance outcomes and concludes with policy recommendations for the government and strategic suggestions for MSME owners to maximise the benefits of the GST regime.
Keywords: GST, MSMEs, Financial Performance, Input Tax Credit, Compliance Costs, Profitability, Working Capital, India
