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The implementation of the Goods and Services Tax (GST) in India in 2017 represented a significant turning point in the country’s indirect tax framework, intending to consolidate various state and central taxes into a singular, destination-based tax. This article provides a critical analysis of GST’s dual effects on India’s micro, small, and medium enterprises (MSMEs), which play a crucial role in rural employment and exports. Firstly, GST has brought about substantial advantages by streamlining tax structures, facilitating nationwide input tax credits, and promoting formalisation and market access for MSMEs. The new system has minimised logistics and compliance redundancies, particularly benefiting manufacturing sectors such as textiles in Gujarat and enhancing credit access through initiatives like GST-invoice financing. Secondly, the article underscores significant transitional and ongoing challenges faced by MSMEs. The requirements for digital compliance, frequent changes in rates, and intricate filing processes have placed an undue burden on smaller and rural enterprises, many of which lack dependable digital infrastructure or accounting capabilities. The constitutional commitment to equality and welfare is thus put to the test, as uniform tax structures frequently do not consider the specific limitations of micro-entrepreneurs and disadvantaged groups, including women and marginalised communities. A comparative assessment with pre-GST India and international models indicates that, although GST has improved the efficiency of India’s tax system, it still falls short of global best practices regarding simplified compliance for micro-businesses. The article concludes that forthcoming GST reforms should focus on providing tailored technical assistance, simplifying filing processes, offering sector-sensitive exemptions, and ensuring timely input tax credit refunds to guarantee that MSMEs not only endure but flourish, thereby upholding the constitutional vision of equitable and inclusive economic growth.

Introduction

The Goods and Services Tax (GST), introduced in July 2017 via the 101st Constitutional Amendment, radically altered India’s indirect tax landscape. It subsumed myriad central and state levies (sales tax, excise, service tax, etc.) into a single destination-based tax under a uniform framework. The change was premised on improving efficiency and “One Nation, One Tax” unity of the market. For the vast network of micro, small and medium enterprises (MSMEs) – the engine of India’s rural employment and exports – GST has been a double-edged sword[1]. On one hand, it offers scope for cost savings and market expansion through input tax credits and a common platform.[2] On the other, it imposes new procedural burdens of digital compliance and uniform rates that press harder on smaller units. A granular, constitutionally-grounded analysis can reveal how GST’s promise of simplification coexists with substantial transitional challenges for MSMEs.

Constitutionally, GST rests on Article 246A[3], empowering Parliament and State legislatures to tax the supply of goods and services on a concurrent basis. The GST Council (Article 279A[4]) – comprising the finance minister and state ministers – shares rule-making powers, embodying cooperative federalism. Thus, GST is an exercise of joint legislative authority, unlike earlier regime fragmentation. From the vantage of fundamental and directive principles, GST’s impact on MSMEs implicates notions of equality and welfare. The Constitution’s promise to “promote equal justice” (Article 39[5]) and safeguard cottage industries (Article 43[6]) comes into play when a uniform tax may disproportionately affect micro-enterprises. In interpreting these constitutional layers, one may ask whether the tax structure appropriately balances the state’s revenue goals with the special needs of the smallest enterprises, especially those owned by women and marginalised communities.

Empirically, GST has had sweeping effects on MSMEs. In the long run, formalisation has accelerated: over 3.1 crore MSMEs are GST-registered today, contributing about 30% of GDP and nearly 50% of exports.[7] The earlier fragmented nature of taxation also dissuaded investment in the infrastructure of the day. As different types of taxes were imposed at different stages—excise duty during production, VAT during selling, and central sales taxes (CST) during inter-state transactions—companies preferred optimising for tax evasion as compared to efficiency. Warehousing decisions, for example, would get made in a bid to avoid paying tax instead of supply chain logic, leading to inefficiencies in operations. The unified regime has reduced historical inefficiencies – for example, by eliminating most CST and local check-post levies – so that logistics costs have fallen sharply. Indeed, ratings agencies estimated GST could slash non-bulk goods’ logistics costs by up to 20%.[8] This has directly benefited manufacturers who can now consolidate warehousing and move goods across states more freely, aided by the e-Way Bill system and a single pan-India supply chain

Moreover, the administrative structure was also cumbersome. Various authorities dealt with state VAT as well as central taxes, resulting in duplication of effort, overlapping audit, and risking litigation in multiple forums. MSMEs were disproportionately affected, specifically because most of them do not have in-house legal and financial expertise. Bending this regulatory maze meant that MSMEs would be forced to divert time and effort from core business operations. Moreover, sectors with heavy capital inputs (like textiles and engineering) benefit from comprehensive input tax credits (ITC), lowering their effective tax burden. In Gujarat’s textile belt, for instance, MSMEs report lower input costs and smoother interstate trade under GST.[9] These gains have helped drive output growth; some analysts note that sales in the textile MSME segment grew in the double digits recently, buoyed by ITC and eased logistics.

However, these structural benefits are counterweighted by significant compliance costs. The new GST law mandates frequent returns and sophisticated record-keeping for all but the smallest firms. MSMEs now must file GSTR-1 (invoice details) monthly and GSTR-3B (summary) quarterly online. [10]Many small units, long accustomed to cash sales and informal bookkeeping, struggle with this shift. A Deloitte/GST@6 survey found roughly 70% of MSMEs viewed compliance complexity as a concern. Deploying accountants or software – often in the absence of reliable internet in villages – adds to administrative overhead. For example, one industry analysis notes that many micro-manufacturers face “procedural complexities” and cash-flow snags from delayed GST refunds. In practice, about 70% of MSMEs in some surveys reported higher administrative expenses after GST, even as nearly 90% saw reduced goods costs.[11] In short, GST has cut the tax rate on average, but its uniform and digital enforcement has burdened the back-office functions of small firms.

Comparative Analysis

GST’s impacts can be better understood by contrasting it with India’s pre-GST regime and international models. Before GST, India’s indirect tax system was highly fragmented. A manufacturer faced Central Excise on factory output, VAT at varying state rates, Central Sales Tax on inter-state sales, and local cess/entry taxes. This patchwork led to cascading taxes and border delays. By merging most of these levies, GST harmonised rates and significantly improved logistics: for example, Crisil estimated a potential 20% cut in logistics costs due to the phased-out CST and dismantling.[12] Likewise, MSMEs now enjoy streamlined interstate trade: multiple Central and State registrations have been replaced with a single unified GSTIN, giving small traders access to a wider customer base nationwide. These structural changes have reduced the overall tax incidence on many products (e.g. textiles and furniture saw combined rates fall from 25–30% to 18% or lower. Pre-GST, an artisan selling handicrafts to another state might pay myriad small taxes; now, under GST, only a single rate applies with input credits available, theoretically expanding market access.

On the other hand, GST’s compliance regime is more onerous than the older VAT/service-tax system. Earlier, many states offered simpler single-point VAT registration and quarterly filings. In contrast, full GST registration brought monthly e-filings and digital invoices. A global comparison highlights this tradeoff. In the European Union, most countries allow small businesses below a turnover threshold (often €85,000–100,000) to remain exempt from VAT, and many provide simplified annual or quarterly schemes.[13] In practice, an Italian trattoria or a German tailor below the national threshold can forego VAT registration entirely, avoiding VAT paperwork; GST in India has no similar universal exemption below a high turnover (except the composition scheme capped at ₹1.5 crore[14]). Meanwhile, Australia’s GST is often cited as a model of simplicity: it has a single flat rate of 10.0% and allows most small businesses to file a Quarterly Business Activity Statement (BAS) instead of monthly returns.[15] The OECD notes that Australia’s 10% GST rate (with extensive zero-rated items) keeps the standard rate well below the OECD average of 19.3%.[16] Indian policy-makers have even proposed adopting a BAS-like quarterly system for small taxpayers. Under such a regime, an MSME would collect GST but pay it quarterly, easing cash-flow impact. A unified Australian GST (10%) also enjoys broad compliance due to a simple rate and stable rules, whereas India’s multi-rate structure (0%, 5%, 12%, 18%, 28%) and frequent rate changes (e.g. textiles and handicrafts moved between 5–18% since 2017) create uncertainty for producers.[17]

Sectoral differences within India further underscore GST’s uneven effects. Other challenges include constant changes in the filing rules, technical issues on the GST portal, and monthly reconciliations of input-output bills. These put a strain on the modest administrative capacity of small businesses, compelling them to outsource accounting services, which could result in inaccuracies in data or financial exposure. Besides, the reconciliation process of outward and inward supplies (coordinating GSTR-1 with GSTR-2A/2B) has turned into a highly complex job, particularly when counterparties are late with filing. Businessmen in such a situation are invariably denied credit, which impacts their working capital and financial planning. The hassles of this complicated system eventually deter compliance and lead to discontentment among legitimate taxpayers. Manufacturing MSMEs have generally benefited more than service MSMEs. Manufacturers can claim ITC on raw materials, so their effective taxes have often fallen. For instance, Gujarat’s textile units get input credits on yarn, resulting in a net tax rate often below the previous regime’s VAT. In contrast, many service MSMEs (especially in IT and professional services) face an 18% GST rate on their output. Before GST, IT services were taxed at 15% (service tax) and subject to some export rebates. Now with 18% GST and stricter definitions, some small IT firms feel squeezed. A medium-sized software company in Bangalore now pays higher tax unless it completely exports its services (zero-rated). Thus, while manufacturing sectors see “tax burden reduction” under GST, service sectors – particularly those serving domestic clients – often report a higher tax cost.[18]. IT MSMEs also struggle with documentation: unlike commodities, services do not have an e-way bill to streamline movement, but they must still manage digital invoicing and reconcile input credits. In sum, GST has simplified manufacturing tax flows but imposed a heavier rate burden and reporting duty on many services, creating a divergence in how different MSMEs fare.

Sector-Specific and Regional Case Studies

Looking at concrete examples illuminates GST’s variegated impact across industries and states.

Textiles in Gujarat: Gujarat is India’s textile heartland, with countless small dyeing, spinning, and garment units. Here the GST regime delivers clear ITC advantages. Firms can now claim credit on inputs like cotton yarn and dyes, which was difficult under the pre-GST tax labyrinth. The ease of moving goods across the state’s well-developed road network is enhanced by uniform GST; no longer do trucks pause at state borders. In practice, many Gujarati textile MSMEs report faster turnaround of goods and lower working capital needs. Their output grew markedly post-GST, aided by a boost in formal credit due to improved compliance. For example, industry sources estimate that textile exports (dominated by Gujarat) have grown about 15% in the last year, a rise partly attributed to GST-enabled cost savings[19]. However, these enterprises also contend with policy whiplash: frequent GST rate changes on fabrics (e.g. shifting between 5%, 12%, and 18%) create planning headaches.[20] A manufacturer cannot be sure if a consignment will attract the same tax next quarter, which complicates pricing and inventory decisions. Thus, even here, the promise of GST’s uniform market is tempered by volatility in tax rates.

Retail in Tamil Nadu: Tamil Nadu, with its blend of manufacturing hubs and urban centres like Chennai, offers another story. Small retailers and auto-component MSMEs in the state have benefited from the GST’s reduction of border taxes. For example, a Chennai-based textile wholesaler, for instance, now buys fabrics from Kolkata or Mumbai without paying additional state-level entry tax, reducing final prices and improving margins. Supply chains have become more transparent with GST-compliant invoicing, and modern retail networks (like multi-state supermarkets) can source inventory more cost-effectively. On the flip side, Tamil Nadu’s legion of small Kirana shops has faced new compliance burdens. Despite schemes allowing quarterly filings, many shopkeepers struggle with online filings and e-invoicing. In an informal survey by a regional trade association, dozens of small vendors in Coimbatore reported hiring accountants at extra cost or being fined for late returns. Thus, while the retail sector’s efficiency has improved under GST’s unified national market, the digital requirements have imposed new compliance costs on shop-floor retailers in Tamil Nadu.[21]

Food Processing in Bihar: Moving to the Hindi heartland, Bihar’s rural food-processing units – like rice mills and edible oil refineries – illustrate another duality. Many of these MSMEs fall under the GST composition scheme, paying a flat low rate on turnover. This shields them from detailed ITC accounting (which can be onerous) but also means they cannot claim credits. Composition has been a relief: factories processing pulses or spices up to ₹1.5 crore turnover now pay only 1–5% tax without running numerous monthly returns.[22] For compliant units, this has freed up cash and encouraged bank financing. However, the flip side is that these Bihar enterprises often lack digital infrastructure. Even for composition taxpayers, filing the Quarterly Form CMP-08[23] electronically is mandatory. In villages, low awareness and intermittent internet make even quarterly returns a challenge. Many mills rely on forgetful rubber-stamp accountants. In short, Bihar’s MSMEs benefit from the composition scheme’s lower rates, but struggle with the “last mile” of compliance in remote areas.[24]

Urban vs. Rural Divide: Nationally, GST uptake has varied sharply between large cities and far-flung districts. Urban MSMEs, especially in financial centres like Mumbai or Bengaluru, have adapted quickly. A Mumbai auto parts shop, for example, seamlessly integrated GST billing software and already enjoyed 100% compliance. The gap arises from multiple factors: smaller town businesses often depend on cash sales and know their customers, so they see little incentive to formalise. Even when they do register, patchy internet and digital illiteracy mean many return deadlines are missed or data submitted incorrectly.[25] The result is a two-speed landscape: dense urban clusters push ahead into the GST formal economy, while rural clusters, which host millions of marginal artisans and traders, remain only partially integrated. This urban–rural compliance divide highlights a social dimension of GST’s impact: the law’s one-size-fits-all approach tends to exacerbate existing inequities in infrastructure and capabilities.

The GST system relies on digital infrastructure. That allows transparency but creates entry-level impediments for MSMEs in rural and semi-urban regions of the nation. Inadequate access to regular internet, coupled with poor digital literacy, hinders proper compliance. Also, the requirement of e-invoicing, e-way bills, and real-time data submission has brought about operational complexity for businesses without dedicated IT staff or modern software. Literacy issues in digital technology are further aggravating the problem, especially among first-generation entrepreneurs in Tier-II and Tier-III towns.[26]

Digital integration also assumes seamless system availability and software ease. But abrupt portal crashes near filing deadline, repeated alterations in tax practices, and inadequate grievance redressal mechanisms have made even basic compliance uncertain. MSMEs focus on penalties for technical issues beyond their control.

Economic, Social, and Policy Implications

GST’s broad economic impact on MSMEs encompasses both macro- and micro-level effects. On the positive side, formalisation induced by GST has measurably swelled the tax base and contributed to government revenues. In FY 2023–24, gross GST collections reached about ₹20.18 lakh[27] crore, a nearly 12% jump from the previous year. A significant share of this comes from small and medium enterprises that chose to formalize to claim benefits. Formalization has downstream GDP effects: more GST-compliant firms are drawn into supply chains and credit channels, boosting productivity. Indeed, experts argue that GST’s long-run impact on growth is largely favorable once teething issues are resolved.

Yet GST’s rollout did incur short-term costs. The upheaval of July 2017 was associated with a slowdown in output growth. Several estimates suggest a temporary contraction of roughly 4–5% in industrial output immediately post-GST, as businesses adapted to new procedures. Micro-enterprises were especially hit: many halted production for weeks to learn the new system. Data from the years immediately following GST show a blip in MSME credit off-take and a modest dip in rural job creation. For instance, in the first two quarters of 2017–18, credit growth to small borrowers slowed, partly due to a flux in turnover numbers after formalisation. These figures highlight that any major tax reform, however well-intentioned, can momentarily dent economic momentum.

Last-minute changes in rate slabs, exemptions, and filing procedures confuse businesses so much that they find it hard to devise long-term pricing, procurement, and investment strategies. For example, repeated changes in applicable GST rates for the textile and footwear industries puzzle producers and consumers alike. Likewise, mid-sized businesses were panicked and bewildered by redefining e-invoicing thresholds. Constantly having to keep up with new rules without sufficient transition period and training adds to the mental and financial burden of small business owners.[28]

Socially, GST has had mixed effects on different demographics among MSME owners. Studies indicate that women-owned micro-enterprises, such as handicraft units in Uttar Pradesh and Madhya Pradesh – have faced disproportionately high compliance costs. Many of these rural women entrepreneurs export to niche markets yet lack accounting support. They often operate from home, selling goods that were previously GST-exempt; under GST, sudden tax liabilities on inputs (like raw fabric) have squeezed their already thin margins.[29] This underscores how GST can amplify social disparities: those with fewer resources or formal education find it harder to reap GST’s advantages. In a sense, GST’s uniform application runs contrary to the Constitution’s aim of protecting “weaker sections” (Article 46[30]) through targeted concessions.

In response, policy-makers have introduced measures to mitigate these burdens. The QRMP (Quarterly Return – Monthly Payment) scheme allows small businesses (turnover up to ₹5 crore) to file one quarterly GSTR-3B instead of three monthly returns, reducing paperwork and spread payment burden. Likewise, the GST Sahay initiative – now offered by banks like PNB – is an app-based invoice financing facility. Under GST Sahay, an MSME can pledge its GST invoice to obtain short-term credit (e.g. up to ₹2 lakh per invoice) without traditional collateral.[31] This leverages the GST return as proof of business and eases liquidity constraints. Other reforms (repeated in GST Council meetings) include relaxation of late fee waivers, extended timelines for claiming ITC, and stricter checks against fake invoice networks. These adaptations acknowledge the early GST strain on small entrepreneurs and attempt course corrections.

Another advantage of GST to MSMEs is the facilitation of smooth Input Tax Credit (ITC). By enabling business houses to set off tax paid on inputs against tax on output, GST has dramatically lowered the cost of production. This mechanism has taken care of one of the biggest pre-GST period worries—tax cascading, where additional taxes were charged on previously taxed goods, so that there is an inflated end cost. With GST, MSMEs that manufacture or provide services can now claim ITC on raw materials, input services, and capital goods utilised in the business. The system is tax-neutral as it allows businesses to claim credits at all supply chain stages, making the effective tax burden lower and prices more competitive in domestic and foreign markets.

Going forward, further measures can draw on global best practices. From the EU experience, India can consider raising the current GST registration exemption threshold (currently ₹40 lakh for goods) to a higher level, effectively exempting many micro-enterprises altogether. Alternately, a pan-India “small business scheme” with simplified rules (no e-way bills, annual instead of periodic filing) could mirror the new EU VAT “SME exemption” regime.[32] Australia’s GST model suggests additional lessons: its flat 10% rate with an even simpler filing regime (quarterly BAS statements) keeps compliance costs low. Adapting such models, India might further streamline GST return processes or introduce a minimal “cash-based” GST scheme for the smallest suppliers. Subsidised compliance tools (like free GST accounting software) and intensive rural training camps can help bridge the urban-rural digital gap. Faster refund disbursal is also crucial: delayed ITC refunds have been a persistent cash-flow squeeze, and accelerating those (perhaps via bank escrow mechanisms) would be a boon. In sum, while GST’s architecture is fixed by law, its implementation can and should evolve to reduce burdens on disadvantaged MSMEs.

Critical Analysis

GST’s impact on MSMEs epitomises a classic tradeoff in public policy. Structurally, the reform delivers simplification – a single tax base, broad ITC, unified markets, which is a pro forma achievement in tax design. However, the flip side is procedural complexity. Layered beneath the constitutional amendment is a cumbersome digitised machinery. As analysts have observed, GST has proven a “double-edged sword” for small businesses[33]: it streamlines the tax code but enforces it with an army of return filings and data rules. This duality is perhaps inevitable. Unlike income tax, where the focus is on large filers, a consumption tax covers all suppliers. In trying to make the tax truly universal (all transactions above threshold must register), the law has created a compliance avalanche. Indeed, even “informal” vendors were drawn into the system, sometimes grudgingly. The constitutional biography approach suggests seeing GST as a process: initially aimed at equitable tax distribution (Article 265[34] prohibits discriminatory tax laws), but quickly revealing that uniformity of law can collide with disparity of means.

The GST system has been a major driver in nudging India’s largely informal MSME industry towards formalisation. Previously, numerous small businesses existed below the tax threshold, without growth prospects, formal credit access, and engagement in organised supply chains. GST imposes registration on any company with a turnover exceeding the set minimum (₹40 lakh for goods, ₹20 lakh for services for the majority of states), thus pushing enterprises into the formal tax fold. Formalisation has various benefits. Registered MSMEs are eligible for ITC, get listed on government procurement portals like GeM (Government e-Marketplace), and seek business loans and subsidies. Banks and NBFCs now increasingly use GST returns and e-invoices to establish creditworthiness. This has led to access to a wider range of credit products like invoice discounting, collateral-free MSME loans, and supply chain finance.

On competitiveness, the picture is mixed. Indian MSMEs have become more outward-looking under GST. Export-oriented units benefit from zero-rating of exports and smoother logistics; in FY24, MSME export growth was healthy (often cited around 10–12%). Yet profitability is not guaranteed to rise; many exporters note that they still suffer from blocked tax credits or onerous documentation. A case in point: an electronics manufacturer in Gurugram reported 12% growth in export orders post-GST but a thinning of margins due to additional input costs on certain components. 12% is indeed strong, but net profit percentages actually ticked downward because of higher compliance and financing costs in the transition period. [35]In this light, the uniform application of GST has had an ambivalent effect: it enhances India’s overall export competitiveness by removing cascading levies, but at the micro level, it can squeeze delicate profit margins when export incentives are offset by domestic tax outflows. This tension underscores a constitutional nuance: Article 14[36] permits reasonable classification, but lumping tiny enterprises into the same GST net as large ones stretches that principle. Ideally, tax law would respect that differences in scale justify different treatment.

MSMEs tend to work on wafer-thin margins and constrained cash flows. Delayed ITC refund has emerged as a major challenge. The refund cycle is usually 30 to 60 days, during which MSMEs experience working capital constraints. Not only does this raise costs of operation, but also deters growth and investment. Add to these the frequent discrepancies in invoice information between buyers and suppliers, which end up in rejection or postponement of refund claims. These discrepancies may not even be deliberate but are usually caused by technical glitches or faulty entries, which small businesses find difficult to clear without professional assistance. Also, industries having seasonal or cyclical sales patterns are likely to experience more acute cash-flow problems[37]

One can thus critique GST’s uniformity through the lens of micro-justice. Micro-MSMEs (turnover ₹40–50 lakh) often pay nearly the same returns fee as a medium enterprise, yet have far fewer resources. The rate slab system tries to accommodate them, but in practice an 18% GST rate on a small service often hits a thin-profit firm much harder than a corporate with a full-fledged tax team. The law’s one-size-fits-all character recalls challenges of proportionality in constitutional law. Whereas Article 38[38] directs the State to protect weaker sections, the GST legal framework does not differentiate on social criteria. Perhaps future judicial or legislative review could consider such equity questions – for example, mandating a special micro-filer scheme (akin to very small traders’ exemptions) that honours the constitutional commitment to uplift the small entrepreneur.

In sum, GST has been a landmark restructuring of India’s indirect taxation, and it has brought real gains in efficiency and formalisation for MSMEs. Yet these gains come at the cost of greater procedural complexity and transitional pain, especially for the smallest and most vulnerable businesses.[39] The policy and constitutional discourse now needs to reconcile these outcomes. Has GST, in practice, advanced the constitutional values of equality and welfare for the masses, or has it favoured efficiency over equity? This remains a live question. What is certain is that any further tweaks to the law must prioritise MSMEs not just as taxpayers, but as engines of inclusive economic growth.

Conclusion

GST’s introduction has unquestionably had a dual effect on India’s MSMEs. On the positive side, the unified tax has extended input tax credits to unorganised producers, enabled seamless interstate trade, and integrated small businesses into a larger supply chain. These structural benefits, coupled with government initiatives like the composition scheme and invoice-finance apps, have brought many MSMEs closer to the formal economy. On the negative side, the advent of digital compliance and a uniform multi-rate tax has imposed significant challenges. Small vendors and rural artisans often struggle with filing requirements and higher effective tax rates, while abrupt rate rationalisations create uncertainty.

In light of this, policy-makers should steer GST reform with an explicit MSME focus. Recommendations include technical support for filing (such as subsidized accounting software and helplines), greater use of simplified returns (expanding the quarterly and composition schemes), and policy borrowing from abroad. For example, India might consider an Aussie-style quarterly payment system for very small taxpayers, or an EU-style exemption for turnover below a threshold.[40] Socially, there should be special outreach to women and marginalised entrepreneurs, for instance, village GST centres or mobile facilitation vans to assist handicraft and food-processing units. Crucially, speedy ITC refunds must be ensured to prevent working capital crunches.

Ultimately, the success of GST will be judged by how well the system uplifts MSMEs as a class. A constitutionally sensitive approach recognises that one rule cannot impact all parties equally. The law’s spirit demands that the smallest players not be buried under procedures intended for larger firms. In the end, while GST’s formalisation drive has expanded the tax base, India’s long-term growth will hinge on the resilience of its MSMEs. Ensuring that these enterprises thrive through targeted reforms and ongoing fiscal support – must remain a priority in the post-GST era. Only by doing so can India fulfil its constitutional vision of equitable development, with MSMEs leading the way to truly inclusive economic growth.

Notes: 

[1] Balancing Reform and Reality: The GST Dilemma for MSMEs, https://www.flame.edu.in/in-the-media/balancing-reform-and-reality-the-gst-dilemma-for-msmes (last visited May 28, 2025).

[2] How GST Registration For MSME Important? Entire Details., https://www.indifi.com/blog/everything-msmes-need-to-know-about-gst/ (last visited May 27, 2025).

[3] The Constitution of India 1950, art 264A.

[4] The Constitution of India 1950, art 279A.

[5] The Constitution of India 1950, art 39.

[6] The Constitution of India 1950, art 43.

[7] GST Collection Surges over 10 per Cent to Rs 1.82 Lakh Crore in July, The Economic Times, Aug. 2, 2024, https://economictimes.indiatimes.com/news/economy/finance/gst-collection-surges-over-10-per-cent-to-rs-1-82-lk-cr-in-july/articleshow/112199697.cms?from=mdr; Business Standard, MSMEs Continue Their Recovery Post-Pandemic: Says the Second Edition of MSME Sampark Report by Dun & Bradstreet and Ugro Capital, (Oct. 14, 2024), https://www.business-standard.com/content/press-releases-ani/msmes-continue-their-recovery-post-pandemic-says-the-second-edition-of-msme-sampark-report-by-dun-bradstreet-and-ugro-capital-124101400529_1.html.

[8] GST Will Slice up to 20% off Logistics Costs, Crisil Says, The Times of India, Jun. 9, 2015, https://timesofindia.indiatimes.com/business/india-business/gst-will-slice-up-to-20-off-logistics-costs-crisil-says/articleshow/47601546.cms.

[9] Impact of GST on MSMEs in India: Key Benefits and Challenges, IIFL Finance, https://www.iifl.com/knowledge-center/msme/impact-of-gst-on-msmes (last visited May 27, 2025).

[10] Aaryan Singh, GST Impact on MSME Sector: Benefits & Challenges | CaptainBiz, (Dec. 7, 2023), https://www.captainbiz.com/blogs/gst-and-the-msme-sector/.

[11] 6 Years of GST: 88% MSMEs See Reduced Cost of Goods and Services, Says Deloitte Survey, Financialexpress (Jun. 20, 2023), https://www.financialexpress.com/business/sme-msme-eodb-6-years-of-gst-88-msmes-see-reduced-cost-of-goods-and-services-says-deloitte-survey-3133848/.

[12] GST Will Slice up to 20% off Logistics Costs, Crisil Says, The Times of India, Jun. 9, 2015, https://timesofindia.indiatimes.com/business/india-business/gst-will-slice-up-to-20-off-logistics-costs-crisil-says/articleshow/47601546.cms.

[13] VAT for Businesses – European Commission, https://taxation-customs.ec.europa.eu/taxation/vat/vat-businesses_en (last visited May 27, 2025).

[14] Impact of GST on MSMEs in India: Key Benefits and Challenges, IIFL Finance, https://www.iifl.com/knowledge-center/msme/impact-of-gst-on-msmes (last visited May 27, 2025).

[15] Revenue Statistics in Asia and the Pacific 2024, OECD (Jun. 25, 2024), https://www.oecd.org/en/publications/revenue-statistics-in-asia-and-the-pacific-2024_e4681bfa-en.html.

[16] Id.

[17] Madhu Bala, GST in India and Its Impact on Indian Economy, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3555294 (last visited May 30, 2025).

[18] India Software Development – Tax and Legal Issues | Software Outsourcing India – Offshore IT Software Development, https://www.itoutsourcingindia.com/outsourcing/tax (last visited May 27, 2025).

[19] (PDF) IMPACT OF GOODS AND SERVICES TAX (GST) ON MSMEs, ResearchGate, https://www.researchgate.net/publication/349924670_IMPACT_OF_GOODS_AND_SERVICES_TAX_GST_ON_MSMEs (last visited May 27, 2025).

[20] Id.

[21] Bala, supra note 17.

[22] Shubham Garg, Mittal ,Sangeeta & Aman and Garg, Investigating the Implications of Goods and Services Tax Revenue on Economic Growth: Empirical Insight from Indian Economy, 12 Stat. Public Policy 2436196 (2025), https://doi.org/10.1080/2330443X.2024.2436196.

[23] FAQs, https://tutorial.gst.gov.in/userguide/returns/FAQs_CMP02.htm?rhsearch=3B&rhhlterm=3b (last visited May 27, 2025).

[24] Making Digital Financial Inclusion a Reality | Economic and Political Weekly, (Sep. 4, 2021), https://www-epw-in.rgnul.remotexs.in/journal/2021/36/commentary/making-digital-financial-inclusion-reality.html.

[25] Id.

[26] Shubham Garg, Mittal ,Sangeeta & Aman and Garg, Investigating the Implications of Goods and Services Tax Revenue on Economic Growth: Empirical Insight from Indian Economy, 12 Stat. Public Policy 2436196 (2025), https://doi.org/10.1080/2330443X.2024.2436196.

[27] GST Collection Surges over 10 per Cent to Rs 1.82 Lakh Crore in July, The Economic Times, Aug. 2, 2024, https://economictimes.indiatimes.com/news/economy/finance/gst-collection-surges-over-10-per-cent-to-rs-1-82-lk-cr-in-july/articleshow/112199697.cms?from=mdr.

[28] Garg and and Garg, supra note 26.

[29] Pooja Verma, Chikankari Sector of Lucknow: Challenges Faced by Woman Artisans, 9.

[30] The Constitution of India 1950, art 46.

[31] Punjab National Bank Launches GST Sahay App for Invoice-Based MSME Loans up to Rs 2 Lakh, Financialexpress (Aug. 31, 2023), https://www.financialexpress.com/business/sme-punjab-national-bank-launches-gst-sahay-app-for-invoice-based-msme-loans-up-to-rs-2-lakh-3227651/.

[32] VAT for Businesses – European Commission, https://taxation-customs.ec.europa.eu/taxation/vat/vat-businesses_en (last visited May 28, 2025).

[33] Balancing Reform and Reality: The GST Dilemma for MSMEs, supra note 1.

[34] The Constitution of India 1950, art 256.

[35] Bala, supra note 17.

[36] The Constitution of India 1950, art 14.

[37] Garg and and Garg, supra note 26.

[38] The Constitution of India 1950, art 38.

[39] Balancing Reform and Reality: The GST Dilemma for MSMEs, supra note 1.

[40] VAT for Businesses – European Commission, https://taxation-customs.ec.europa.eu/taxation/vat/vat-businesses_en (last visited May 28, 2025).

***

Author– Aarish Alam
Co-Author– Rudraksh Singh Sisodia
Designation– Student, B.A.LL.B.(Hons), 3rd Year
Affiliation– Rajiv Gandhi National University of Law(RGNUL), Punjab

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