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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM67379
Volume:
10 |
9 |
Sep 2026
Pages:
1-6
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.
COMMERCE
Government Commerce College, Alwar
The Goods and Services Tax (GST) regime was introduced in India in July 2017, consolidating various indirect taxes into a single tax regime and allowing input tax credit (ITC) for eligible business purchases. But for Micro, Small and Medium Enterprises (MSMEs), the impact on working capital has been varied. While GST can help eliminate tax cascading and facilitate interstate goods flow, compliance costs, problems in accessing input tax credit, refund issues, and tax obligations prior to receipt of customer payments can cause liquidity pressures. The problems are applicable in the context of MSMEs in Rajasthan, which are engaged in manufacturing, textiles, handicrafts, engineering, touristic activities and trading. The relationship between GST and working capital of MSMEs has been analysed in the present paper which uses literature search, statutory provisions, and available sources of secondary data. The analysis reveals that GST's effects are influenced by the size of the firm, industry, digital preparedness, the number of payment cycles and the capacity to handle tax documentation. It finds that the benefits of GST will be more pronounced in the future if the system is made more user friendly and the following are put in place:
KEYWORDS
GST has impacted the working capital management of MSMEs in aspects of input tax credit, compliance process, digital accounting and timing of payments. It has a built-in tax structure which may minimize cascading taxation, and better records can enhance operational control, which can facilitate interstate business. Compliance costs, the challenges of accessing eligible credits, delayed refunds and tax reporting that falls short of customer receipts, however, can restrict cash flow, especially for businesses with limited cash resources. The impact will not be consistent for MSME in Rajasthan. Whether GST related processes enhance financial efficiency or exacerbate short term cash-flow pressures could depend on the differences in the sectors, enterprise size, digital capability, inventory requirements and customer-payment cycles. The evidence examined indicates that the overall impact of the introduction of the GST has neither proved to be a indiscriminate rise in working capital or a fall. The key focus point of the policy must be to make it more predictable and more accessible to comply with GST, and to enhance the credit utilisation, the tax awareness, digital capability, and discipline of payments. Representative financial information at the level of states in Rajasthan needs to be studied in the future to quantify these effects and identify the best category of MSMEs that need the most support.
Bhayani, S. (2024). Impact of GST on MSMEs: A Critical Assessment of Rajasthan State. SSRN working paper. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5023056 Bhalla, N., Sharma, R. K., & Kaur, I. (2023). Effect of Goods and Service Tax System on Business Performance of Micro, Small and Medium Enterprises. SAGE Open. https://doi.org/10.1177/21582440231177210 Government of India. (2017). The Central Goods and Services Tax Act, 2017, Section 16: Eligibility and conditions for taking input tax credit. Central Board of Indirect Taxes and Customs. https://taxinformation.cbic.gov.in/content-page/explore-act/1000285/1000001 Government of India. (2006). The Micro, Small and Medium Enterprises Development Act, 2006. Ministry of Micro, Small and Medium Enterprises. https://msme.gov.in/ Sharma, H., & Modi, R. K. (2025). The Influence of Goods and Services Tax (GST) on Working Capital Management of Micro, Small and Medium Enterprises (MSMEs) in Rajasthan: An Empirical Study. International Advance Journal of Engineering, Science & Management, 24(3), 410–419. https://iajesm.com/publishedpapers.php?%24issue=III&%24volume=24&%24year=2025&cat=6
Publication Date
9/28/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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Conflict of Interest
The authors declare no conflict of interest related to this research work.
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