GST 2.0 and Business Compliance: A Study on the Perception of Small and Medium Enterprises in India

Abstract

Goods and services tax (GST) is one of the most major changes in the form of indirect taxation that have been made in India towards the establishment of a common and understandable tax system. The GST structure has developed over time due to technological and procedural changes and therefore the GST 2.0 has come into place with focus on the digital compliance models, ease of filing and enhancement of transparency in taxation. Small and Medium Enterprises (SMEs) are very crucial to the Indian economy as they are significant in employment generation and economic development. Nevertheless, the adjustment towards regulatory reforms like GST can be a challenge in operational and compliance to such enterprises. In this regard, this paper evaluates how SMEs view GST 2.0 reforms and evaluates how it impacts business compliance behaviour. The quantitative research design is chosen as the study utilizes primary data that was gathered among 150 SMEs in the form of a structured questionnaire. The measurements were taken with the help of a five-point Likert scale and evaluated with the help of the statistical methods such as reliability analysis, descriptive statistics, correlation analysis, and multiple regression analysis. It was revealed that GST 2.0 reform variables such as digital compliance systems, simplified filing processes, tax administration transparency, and efficiency of input tax credit mechanism have an important impact on business compliance of SMEs. Moreover, the perception of SMEs about GST reforms was identified to have positive and significant correlation with compliance behaviour. The findings indicate that the betterment in the GST model and great business attitudes will help enhance the voluntary tax compliance by SMEs. The research will be of significance to policymakers and tax administrators to improve further on GST systems and establish favorable compliance arrangements to motivate SMEs to participate adequately in the formal system of taxation.