GST and the Unorganized Sector: An Empirical Analysis of the Effects of India's Goods and Services Tax on Small and Medium-sized Enterprises (SMEs)
Dr. Gangaraju
Associate Professor, Government First Grade College, Harihara
Keywords: Goods and Services Tax (GST), Small and Medium-sized Enterprises (SMEs), Unorganized Sector, India, Tax
Compliance, Formalization, Input Tax Credit (ITC), Working Capital, Economic Impact.
Abstract
The introduction of Goods and Services Tax (GST) in India on 1 July 2017 was a very big change in our tax system, as we all know. This study tries to look at how GST has affected small and medium businesses, especially those working in the
unorganized sector, which is commonly seen in Indian people doing business. By using information from government reports,research papers, and some industry surveys, this paper explains both the good and bad sides of GST. On one side, GST
helped in bringing one market system, better transport movement, and more clarity in tax payment. But on the other side, many small businesses faced problems. They had to deal with heavy paperwork, delay in getting input tax credit refunds, and shortage of working money. Supply chains which were running for years also got disturbed. This study shows that moving from unorganized to organized system is not easy or direct. Many small firms are adjusting slowly and carefully, which can be called limited or bounded formalization. In the end, the paper suggests that the GST system should be made more supportive so that small businesses can grow smoothly and survive better in the formal economy of our country.
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Published
01-03-2026