Challenges of Goods and Services Tax (Gst): Evidence From Real-Life Experiences

Abstract

The Goods and Services Tax (GST), implemented in India on July 1, 2017, marked a significant reform in the country’s indirect tax structure, replacing multiple taxes such as Value Added Tax (VAT), Service Tax, and Central Sales Tax (CST) with a unified tax system (Government of India, 2017). GST aims to streamline taxation, eliminate tax-on-tax cascading, and foster a transparent, destination-based tax regime. Businesses with an annual turnover exceeding ₹40 lakh for goods or ₹20 lakh for services in normal category states like Maharashtra are required to register under GST, while lower thresholds (₹20 lakh for goods, ₹10 lakh for services) apply in special category states. Nano enterprises are not required to register under GST if they do not cross the threshold turnover. However, they are constrained to register themselves for economic reasons. This is because GST-registered businesses prefer sourcing inputs from GST-compliant businesses. Consequently, many nano and micro enterprises choose to register, even though it is not mandatory. The GST compliance involves filing of monthly (during the year of registration), quarterly and annual returns (digitally) and these entrepreneurs face challenges since they have limited resources.   This research aimed to perform a quantitative and qualitative analysis of the challenges and problems of about 300 plus nano-enterprises concerning the compliances adoptions related to Goods and Services Tax (GST) and offer recommendations on policy interventions. From the study, GST poses many challenges to the majority of nano and small enterprises due to the complexity of the registration process, compliance costs, input tax credit (ITC), constant amendments, and non-uniformity. Nano firms face more severe and costly barriers than micro and small enterprises, which hinder their growth and profits. Acknowledging nano-enterprises as a distinct business entity is the first step toward leveraging their potential. The study recommends policies for considering them as a separate entity in policy formulation.