Volume 02, Issue 9
Published on: September 2026
IMPACT OF GST ON SMALL BUSINESS: EVIDENCE FROM A SURVEY OF SMALL ENTERPRISES
Yogita
Assistant Professor, Commerce & Management, Shah Satnam Ji Girls College, Sirsa, India
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Abstract
Goods and Services Tax (GST) was implemented in India in July 2017, which replaced a complex network of central and state indirect taxes with a single indirect tax based on the place of supply with an input tax credit mechanism by matching the invoice. The impact of such a reform is greatest, especially for small businesses, due to the combination of fixed costs of compliance and limited administrative capacity of small business. To analyse the effects of GST on small businesses with respect to (1) compliance cost, input tax credit (ITC) and working capital, (2) formalization of the market, and (3) perceived performance of the business and to find the characteristics of the firms that influence the effects. The cross-sectional survey was done with 180 small business owners or accounts managers that are registered for the GST in [city/district] by administering a structured questionnaire with 5-point Likert items and recall-based quantitative measures both before and after the implementation of the GST. Descriptive statistics, paired-samples t-tests, correlation and multiple linear regression were used to analyse data. Monthly compliance cost increased from a mean of ₹2,135 to ₹3,432 (p<0.001), and tax-related work increased from 6.3 to 9.8 hours per month (p<0.001), the increase being greatest in the smallest companies. Meanwhile, the number of separate tax registrations decreased and purchases from registered suppliers, and formally invoiced sales, increased dramatically. The working-capital cycle (r = 0.72) was positively associated with the ITC realization delay. Compliance cost burden (β = -0.29) and Digital readiness (β = 0.31) had the highest correlation with perceived performance impact in regression analysis. GST has provided structural benefits for small businesses in the form of less cascading, a one-time registration and increased formalization, alongside recurring compliance costs and credit-linked liquidity pressures. The small companies would be able to keep the advantages without the burden thanks to simplified filing, faster processing of credit and withholding/excess payments, and targeted digital support.
Keywords: Goods and Services Tax; small business; MSME; compliance cost; input tax credit; formalization; tax reform
Keywords: Goods and Services Tax; small business; MSME; compliance cost; input tax credit; formalization; tax reform
How to Cite this Paper
Yogita, (2026). Impact of GST on Small Business: Evidence from a Survey of Small Enterprises. International Journal of Creative and Open Research in Engineering and Management, <i>02</i>(9), 1-9. https://doi.org/10.55041/ijcope.v2i9.224
Yogita, . "Impact of GST on Small Business: Evidence from a Survey of Small Enterprises." International Journal of Creative and Open Research in Engineering and Management, vol. 02, no. 9, 2026, pp. 1-9. doi:https://doi.org/10.55041/ijcope.v2i9.224.
Yogita, . "Impact of GST on Small Business: Evidence from a Survey of Small Enterprises." International Journal of Creative and Open Research in Engineering and Management 02, no. 9 (2026): 1-9. https://doi.org/https://doi.org/10.55041/ijcope.v2i9.224.
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