The introduction of the Goods and Services Tax (GST) in India in July 2017 marked one of the most significant indirect tax reforms in the country’s economic history. Designed to unify the fragmented indirect tax structure into a single, destination-based taxation system, GST aimed to enhance transparency, reduce cascading effects of taxation, and promote ease of doing business. Small and Medium Enterprises (SMEs), which contribute significantly to India’s GDP, employment generation, exports, and regional industrialization, have been among the most affected stakeholders in this transition. This paper examines the impact of GST on SMEs in India by analyzing its implications on compliance burden, cost structure, working capital management, formalization, competitiveness, and digital adoption. The study explores both the positive outcomes such as improved input tax credit mechanisms, enhanced supply chain efficiency, and increased market integration and the challenges faced by SMEs, including technological adaptation issues, increased compliance requirements, liquidity constraints, and procedural complexities. Using a combination of secondary data analysis, policy review, and thematic interpretation of industry reports, the paper evaluates whether GST has achieved its intended objectives from the perspective of small businesses. The findings suggest that while GST has contributed to long-term structural benefits and formalization of the SME sector, the short-term transitional challenges and compliance pressures have disproportionately affected micro and small enterprises. The study concludes with policy recommendations to improve GST implementation mechanisms, simplify compliance procedures, and enhance institutional support for SMEs to maximize the reform’s developmental impact.
