Goods and Services Tax: Empirical Assessment of its Implementation from MSMEs Perspective

Abstract

With the implementation of the Goods and Services Tax (GST), the new tax regime was envisioned to be free from the lacuna of the previous tax system, but it has received mixed reactions from industry, academia, and the society in general. The extensive changes aimed at One Nation, One Tax have had a significant impact on Micro, Small, and Medium Scale Enterprises (MSMEs). In this study, an attempt has been made to highlight the problems faced by MSMEs as a result of GST implementation. The study is based on the primary data which was collected from a reasonable sample of MSME Owners in the Kashmir Valley from Jan – April, 2023. The data was examined using appropriate statistical techniques. The findings show that respondents have insufficient knowledge of the GST web-portal and tax- slabs. The majority of MSMEs believe that GST increased compliance costs due to insufficient IT infrastructure and other ancillary services, which ultimately increased their expenditures.The study concludes that there are lot of obstacles in the implementation of the GST as the business houses face problems with the online E-Way Billing System and the GST Refunds. Moreover, the complex procedures have made the tax system more tedious as there is very low awareness among the assesses which have raised their compliance costs and face hurdles in doing business because of the prevalence of the new tax regime. In this backdrop it is incumbent upon the tax authorities to organize awareness programs and free training sessions to teach MSMEs how to operate the GSTN Portal for regular procedures like submitting returns, obtaining refunds, producing E-Way Billings, etc. Also, the challenges can be mitigated by raising the registration threshold, offering tax benefits, simplifying GST rate structure, introducing a simplified composition system, access to credit, etc.