Ahead of the Union Budget 2026–27, industry bodies, entrepreneurs, and policymakers have highlighted the need for further simplification of the Goods and Services Tax (GST), particularly for small businesses. Stakeholders emphasize reforms that enhance ease of doing business, improve liquidity for micro, small, and medium enterprises (MSMEs), and support sustained economic growth, especially for those operating across multiple states or through e-commerce platforms. Pre-budget discussions are increasingly focused on reducing compliance burdens, ensuring faster credit flows, and providing greater clarity in tax procedures.
Despite the rollout of GST 2.0 and ongoing digitalisation, small and medium enterprises still struggle with complex compliance requirements. Multi-state operations often require multiple registrations, state-specific filings, and repeated audits, all of which increase administrative overhead and reduce operational efficiency. Input Tax Credit (ITC) accumulation caused by inverted duty structures and delays in processing refunds continue to affect cash flows, constraining day-to-day operations and expansion plans. Industry representatives have repeatedly flagged these issues, calling for targeted reforms that would allow GST to support growth while maintaining revenue integrity.
Speaking at GST Samvaad 2.0, Dr. Sasmit Patra, Member of Parliament (Rajya Sabha), stressed that trust should be the foundation of the next phase of GST reforms. “GST was designed as One Nation, One Tax, to simplify business operations, especially for small traders and entrepreneurs. While digitisation and rate rationalisation have improved efficiency, compliance remains disproportionately challenging for small sellers. Multiple registrations, duplicated audits, and working capital locked in accumulated credits continue to hinder growth. If states can trust each other to transfer tax revenues, the same principle should apply to compliant businesses. Simplifying registrations, harmonising audits, and enabling faster credit resolution are essential to ensure GST truly promotes growth.”
Businesses operating across states face multiple challenges, from parallel audits to cash flow pressures arising from unutilised ITC, particularly in sectors with inverted duty structures. E-commerce sellers and micro-entrepreneurs often depend on physical documentation, despite digital options, adding further operational friction.
With MSMEs contributing nearly 30% of India’s GDP and employing over 11 crore people, policymakers have a significant opportunity to pursue calibrated, trust-based GST reforms. Simplifying compliance, streamlining audits, and improving liquidity will not only ease the burden on small businesses but also foster inclusive economic growth as India’s tax framework continues to evolve.
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