| Abstract: |
On 1 July 2017, India ushered in its most robust indirect tax reform since independence, by replacing seventeen central and state levies with a single national Goods and Services Tax (GST) a unified destination-based value-added tax. Small and medium enterprises (SMEs), which make up the vast majority of registered taxpayers, face a disproportionately large part of the compliance burden that the reform represents. This paper explores the compliance behaviour towards Goods and Services Tax (hereinafter referred to as GST) within 200 Small & Medium-sized Enterprises (SMEs) in the Bhopal, Indore and Gwalior regions of Madhya Pradesh State, using a structured questionnaire survey, secondary statistics from the Goods and Services Tax Network (GSTN), parametric tests for analysis where appropriate and non-parametric tests under a stratified random sampling design i.e. Results suggest mean cash compliance cost per firm declined by 27.4% in real terms from 2016–17 to 2023–24, and as monthly compliance hours decreased from on average 22.6 h (to comply) to an average of 14.1 h/month (due to digitization of filing and input tax credit [ITC] utilisation). But compliance cost as a share of turnover is still inversely related to size: the highest for micro enterprises; and 62% of respondents said they had working-capital stress due to delayed credits and invoice mismatches. It concludes that GST structurally has lower transactions costs and full compliance with tax rules, enhancing SME competitiveness, but gains are uneven; it recommends longer quarterly filing, timely ITC refunds and selective digital handholding for micro units. GST compliance therefore acts as a simultaneous growth enabler but also residual tax burden that is concentrated among the smallest firms. |
