Impact of GST Implementation on India’s MSME Sector: Opportunities, Challenges, and Policy Implications

Abstract The introduction of the Goods and Services Tax (GST) was a transformative step in India’s fiscal policy aimed at unifying the indirect tax system and enhancing ease of doing business. While GST has streamlined the tax structure, its implications for Micro, Small, and Medium Enterprises (MSMEs)—which form the backbone of India’s economy—have been complex and multifaceted. This paper analyzes the systemic impact of GST on India’s MSME sector, considering compliance burden, cost structure, competitiveness, and policy alignment. Drawing from secondary sources and contextualized with India’s socio-economic background, the study explores how GST affects MSME productivity, registration behavior, and access to formal credit. The findings suggest that while GST promotes long-term benefits such as transparency and market integration, short-term challenges include increased compliance costs and digital infrastructure gaps. The paper concludes with policy recommendations to support MSMEs through transitional tax regimes. Keywords: GST, MSMEs, Tax Reform, Compliance, Indirect Tax, Indian Economy, GST Council, Formalization, Ease of Doing Business