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Impact of Goods and Services Tax on MSMEs in India: A Comparative Analysis
Subject area: Arts, Social Sciences and Humanities · Area of research: Applied Economics
Abstract
The introduction of the Goods and Services Tax (GST) on 1 July 2017 marked a major restructuring of India’s indirect taxation system and significantly influenced the functioning of Micro, Small and Medium Enterprises (MSMEs). This study examines the impact of GST on MSME performance with a focus on India and the North-Eastern Region (NER). The main objectives are to compare MSME performance in the pre-GST and post-GST periods, analyse regional patterns of MSME development, and assess policy measures required to strengthen MSME resilience within the evolving Next-Generation GST framework. The study is based entirely on secondary data collected from official sources including the Ministry of Micro, Small and Medium Enterprises, Ministry of Finance, GST administrative reports, publications of the Reserve Bank of India, and national statistical databases. Key indicators used for the analysis include MSME contribution to GDP, share of MSME exports in total exports, number of registered MSMEs, bank credit to MSMEs, and growth performance of the MSME sector. The study applies descriptive analysis, pre- and post-period comparison, percentage growth rate analysis, and trend analysis to evaluate structural changes. The findings show that MSMEs contribute around 29–31 percent of India’s GDP, indicating their stable role in economic growth. Their share in total exports remains significant at about 43–49 percent in the post-GST period, although temporary disruptions were observed during the COVID-19 pandemic. The number of registered MSMEs increased notably after the implementation of GST, reflecting greater formalization through digital registration and tax compliance systems. Bank credit to MSMEs has also grown steadily in the post-GST period, suggesting improved access to institutional finance. GST has contributed to better tax transparency and market integration, though compliance capacity remains a challenge for many small enterprises.
Keywords
GST; MSMEs; North-East India; Tax Reforms
References
[1] Anand M (2019). GST and its impact on the informal sector: A critical evaluation. Department of Economics, T. M. Bhagalpur University, Bhagalpur.
[2] Beemabai K, Krishnakumar K (2019). Impact of Goods and Services Tax (GST) on MSMEs in India. International Journal of Innovative Technology and Exploring Engineering, 8(9S3), 1235–1240.
[3] George MR, Antony TM (2021). GST and its versatility: The case of Indian Micro, Small and Medium Enterprises. Mount Carmel College, Bengaluru.
[4] Ministry of Micro, Small and Medium Enterprises (2023). Annual report 2022–23. Government of India.
[5] Organisation for Economic Co-operation and Development (OECD) (2017). Enhancing the contributions of SMEs in a global and digitalised economy. OECD Publishing.
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How to cite this paper
@article{1724716,
author = {Goutam Saikia},
title = {Impact of Goods and Services Tax on MSMEs in India: A Comparative Analysis},
journal = {Iconic Research And Engineering Journals},
year = {2026},
volume = {10},
number = {5},
pages = {825-835},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1724716.pdf},
abstract = {The introduction of the Goods and Services Tax (GST) on 1 July 2017 marked a major restructuring of India’s indirect taxation system and significantly influenced the functioning of Micro, Small and Medium Enterprises (MSMEs). This study examines the impact of GST on MSME performance with a focus on India and the North-Eastern Region (NER). The main objectives are to compare MSME performance in the pre-GST and post-GST periods, analyse regional patterns of MSME development, and assess policy measures required to strengthen MSME resilience within the evolving Next-Generation GST framework. The study is based entirely on secondary data collected from official sources including the Ministry of Micro, Small and Medium Enterprises, Ministry of Finance, GST administrative reports, publications of the Reserve Bank of India, and national statistical databases. Key indicators used for the analysis include MSME contribution to GDP, share of MSME exports in total exports, number of registered MSMEs, bank credit to MSMEs, and growth performance of the MSME sector. The study applies descriptive analysis, pre- and post-period comparison, percentage growth rate analysis, and trend analysis to evaluate structural changes. The findings show that MSMEs contribute around 29–31 percent of India’s GDP, indicating their stable role in economic growth. Their share in total exports remains significant at about 43–49 percent in the post-GST period, although temporary disruptions were observed during the COVID-19 pandemic. The number of registered MSMEs increased notably after the implementation of GST, reflecting greater formalization through digital registration and tax compliance systems. Bank credit to MSMEs has also grown steadily in the post-GST period, suggesting improved access to institutional finance. GST has contributed to better tax transparency and market integration, though compliance capacity remains a challenge for many small enterprises.},
keywords = {GST; MSMEs; North-East India; Tax Reforms},
month = {November},
}