RESEARCH PROJECT REPORT

ON

“IMPACT OF GST ON SMALL SCALE BUSINESSES ”

Submitted fur the partial fulfilment towards the award of the degree in master of
business administration of Dr. Abdul kalam Technical University, Lucknow.

Submitted By:
Adarsh Singh
Roll No. -
2201330700009
(Batch: 2022-2024)

Under the supervision of :

Imran Ali sir

Department of MBA

Noida Institute Of Engineering and Technology

(NIET),19, knowledge park 2, Greater Noida
Gautam Buddha Nagar ,U.P., India, 201306.

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Institut certificat

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 STUDENT’S DECLARATION

I declare that the Research Project Report on “Impact of GST on SMALL SCALE
BUSINESSES” is an original work done by me in accordance with the guidelines
prescribed by the RPR office for preparation of Research Project Report and the work
has not been submitted anywhere else for review.

Adarsh Singh
Roll No- 2201330700009

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 ACKNOWLEDGEMENT

I extend my gratitude Imran Ali, who imparted help support & experience even at the
cost of heavy demand of his precious time & busy schedule. My experience from this
project is indescribable and it has certainly broadened my knowledge arena by
introducing me to the practical problems of the field.
I are also grateful to my friends and family for their support on numerous occasions,
which acted as a morale booster in times of problems. I truly appreciate his thoughtful
recommendations which have gone a long way in making this project successful.

I would like to extend our heartfelt thanks to all the person’s by which I came to know
about the impact of GST on small scale business without whose support we would not
be able to make this project a success one.

Adarsh Singh
2201330700009

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 EXECUTIVE SUMMARY

The introduction of Goods and Service Tax on 1s July, 2017 has revamped the tax
structure and carved out a new path for the Indian economy. The new tax regime
was envisioned to be free of all the problems of the previous tax system but,
however since its proposal it has received mixed reviews from industries, academia
and others. With extensive changes aimed at One Nation One Tax, it has left
massive impact on the Small Scale Industries too. Hence this paper critically
analyses the impact of Goods and Service Tax (GST) on Small Scale Industries
specifically in Karnataka. Existing literature says that GST shall reduce the cost of
doing business, increases transparency, decreases prices of product, increase tax
compliance and improve ease of doing business. This paper proves some of these
assertions through a primary data research and further identifies the need of
reforms with respect to separation of definition of job work and labour work.
Penalties for non-payment of GST, dual administration and issues pending from
the previous tax regime. It has also clearly established that composition scheme has
been a non-performer and the reverse charge mechanism must be re-introduced
later or revamped to balance its costs and benefits. Thus the study has implications
for policy makers, industries and academia and also provides a better
understanding of the new tax system itself.

Key words: Taxation, Goods and Service Tax and Medium and Smal Scale
Industries

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 LISTiOFiCONTENTS

[Link]. Topic Page No.

1. Institute’s Certificate 2
2. Student Declaration 3
3. Acknowledgement 4
4. Executive summary 5
5. Tables of contents 6
6. Introduction 7-17
[Link] of the study 13
[Link] and scope of the study 14
[Link] of the study 15
[Link] review 16-17

7. Company’s Profile 18-24

[Link] overview of industry 19
[Link] players of the industry 22
[Link] and Future scope of the industry 24

8. Research methodology 25-26

[Link] & significance of the problem 25
[Link] design sample size 26

9. Data analysis and interpretation 27-36

10. Learning Outcomes from the report 37-39
[Link] 37
[Link] 38
[Link]/Recommendation 39

11. Bibliography 40
12. Annexure (Questionnaire) 41-43

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 INTRODUCTION

Meaning of GST:

The goods and services tax (GST) is a type of tax levied on most goods and services
sold for domestic consumption in many countries. It is paid by consumers and
remitted to the government by the businesses selling the goods and services. Some
countries have introduced GST exemptions or reduced GST rates on essential goods
and services or have implemented GST credits or rebates to help offset the impact of
GST on lower-income households. The GST is often a single rate tax applied
throughout a country and is preferred by governments because it simplifies the
taxation system and reduces tax avoidance. In dual GST systems, such as those in
Canada and Brazil, the federal GST is applied in addition to a state sales tax. The
GST has been identified by critics as regressive and can potentially place a relatively
higher burden on lower-income household.

GST (Goods and Service Tax) executed by Government of India on 1 st July 2017,
through the execution of ‘One Hundred and First Amendment’ of the Structure of
India. It was tossed at midnight by the President of India, Shri. Pranab Mukherjee and
Prime Minister of India Shri. Narendra Modi. It is a Secondary tax system that
reassured the various taxes i.e. VAT, excise duty, service taxes etc. which were
applied before goods and services tax. According To the Government, GST is a well-
structured and easy assessment system, where the convincing exclusion of central
Government and the state Government has been done. Each enterprise has twin GST
classical related, i.e., Central Goods and Services Tax (CGST) and the State Good and
Services Tax (SGST). The several proportions related to numerous segments and
productions are 0%, 5%, 12%, 18% and 28%. The GST is related on several
Communications such as obtaining, transactions, conversion, exchange, rental and
significance of goods and services. In harmony with the creation of Small Enterprises
Development Act, 2006, is divided under two groups business sector GST is intended
to carry each indirect form of tax below one roof.

For small business proprietors or producers have to take care of dissimilar taxes and
have to track to numerous sections to accomplish all the tax-related Certifications.
Some files will have different taxes biannually, annually, half-yearly. The additional
department, the extra is the annoyance. Now, the Entire tax charged by the central and

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the state Governments enhance to 32% but with the execution of GST, the commercial
owners have to pay a much Lesser tax of about 18-22%. Likewise, they do not have to
reimbursement different duties to numerous subdivisions. It styles the job much
calmer to Business owner. The inference of GST comprised of double assessment
system. If the place of dealer and purchaser are in same state means seller has to
Accumulate both CGST and SGST from purchaser, both central and state Government
will decide on the suitable ration of sharing income.
It has reduced The flowing effect and ended the tax construction more abridged.
Taxes are oblique by the Government on the mutual basic but it does not exceed more
Than 14%.
Various central taxes incorporated are: Central Excise Duty Additional Excise Duty
Service Tax Additional Custom Duty Special Additional Duty Central Sales tax.
Before we analyse the impact of GST on Small Enterprises, we must know how GST
is profitable to broaden the taxpayer Sordid.

Earlier, a producer with revenue of Rs 1.5 crore or less was not essential to obey the
instructions of excise duty. However, with the amalgamation Of all State and Central
level taxes into the domain of GST, a manufacturer with a revenue of Rs 20 lakh
(others) /10Lakh (Special category states) or More will have to fulfil with GST and its
trials. The below mentioned table shows the impact analysis of the small-scale
business entrepreneurs.
Small Scale enterprises are essential part of the Indian economy it’s around 40 % of
total export is being generated by Small Scale enterprises and if we talking About
employment its creature of almost 12 million jobs opportunities. Ministry of small-
Scale enterprises is merge with Ministry of agro and rural Industries to form the big
picture as Ministry of Small-scale enterprise with primary task of promoting of small-
scale enterprises. It was established in
Year October 1999 and then after this ministry divide into SSI and ARI in September
2001.

Compliance Procedure:

Registration: Online processing will certify appropriate receipt of documentation for.

registration and negligible Government interface. Payment Automated submission will
bring transparency and will also decrease the obedience cost.
Payment: Automated submission will bring transparency and will also decrease the
obedience cost.
Refund: Electronic repayment measures will fast trail to the procedure and improve
fluidity for small scale business entrepreneurs.
Returns: All revenues are mandatory to be trooped electronically and input tax credit
and tax liability alteration will occur robotically on the basis of the
Returns.

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HISTORY OF GST:

The history of the Goods and Services Tax (GST) in India dates back to the year 2000
and culminates in 2017 with four bills relating to it becoming an act. The GST Act
aims to streamline taxes for goods and services across India.
The implementation of the Goods and Services Tax (GST) in India was a historical
move, as it marked a significant indirect tax reform in the country. The amalgamation
of a large number of taxes (levied at a central and state level) into a single tax is
expected to have big advantages. One of the most important benefit of the move is the
mitigation of double taxation or the elimination of the cascading effect of taxation.
The initiative is now paving the way for a common national market. Indian goods are
also expected to be more competitive in international and domestic markets post GST
Implementation.

When did GST start?

Several countries have already established the Goods and Services Tax. In Australia,
the system was introduced in 2000 to replace the Federal Wholesale
Tax. GST was implemented in New Zealand in 1986. A hidden Manufacturer’s Sales
Tax was replaced by GST in Canada, in 1991. In Singapore, GST
Was implemented in 1994. GST is a value-added tax in Malaysia that came into effect
in 2015.

Benefits of GST Implementation:

Key benefits of the GST announcement are detailed below:

1. As mentioned above, the GST system will create a common national market that
boosts foreign investment.
2. The cascading effect of taxation will be mitigated
3. There will be uniformity in laws, rates of tax, and procedures across states.
4. The GST regime is expected to boost manufacturing activities and exports. This
would, in turn, generate more employment and lead to the
Growth of the economy.
5. Indian products would be more competitive in the international markets.
6. The GST system is likely to improve the overall investment climate in India.
7. Uniformity in the rates of SGST and IGST will reduce tax evasion to a large extent.

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8. The average sales burden experienced by companies is expected to come down,
thereby increasing consumption and boosting subsequent
Production of goods.
9. GST is a simpler system of taxation with smaller number of exemptions.
10. There are automated and simplified methods for processes such as registration,
refunds, returns of GST, tax payments, etc.

The introduction of Goods and Services Tax (GST) has been heralded as a land mark
in the history of Indian tax system. In 2014, One Hundred and Twenty Second
Constitutional Amendment Bill was introduced in Lok Sabha and this led to the
enactment of the One Hundred and First Constitutional Amendment in August 2016 to
include GST in the constitution. (Bangar & Bangar, 2017). From 1 July 2017, GST
came into existence.

All the Central and State taxes like the excise duty, service tax, entertainment tax,
luxury tax, purchase tax, surcharges and cesses were subsumed under GST. Currently
GST is levied on every product except petroleum, alcohol, tobacco and stamp duty on
real estate in four slabs of 5, 12, 18 and 28 per cent. Most of the daily use articles have
zero GST.

GST is a single and an indirect system of taxation that is levied on ‘supply’ of goods
and services or both (it includes sale, transfer, barter, exchange, license, rentals, lease
or disposal made or agreed to be made for a consideration by a person in the course of
business) except alcoholic liquor for human consumption, right from the manufacturer
to the consumer. (Bangar & Bangar, 2017) Under GST, only value addition will be
taxed and burden of tax is to be borne by the consumer.

Moreover credit of taxes paid at the previous stages is available as set-off. Further
GST is a consumption based tax i.e. the tax would accrue to the taxing authority which
has jurisdiction over the place of consumption which is also termed as the place of
supply (Bangar & Bangar, 2017).

In India the system of GST is unique as there exists a dual GST. Central Goods and
Service Tax (CGST) and State or Union Territory Goods and Service Tax (SGSTI
UTGST) is levied simultaneously for supplies within State or Union Territory and is
payable to Central government and State government or Union Territory respectively.
The Integrated Goods and Service Tax (|GST) is applicable for interstate supplies and
is payable to Central government. Further imports are liable to IGST in addition to
custom duties while exports are zero rated. Also certain goods like petroleum products
and electricity are exempted to be taxed at a later stage.

Though GST seems to be very similar to the previous Value Added Tax System, there
are certain unique characteristics like GST being a consumption based pan-India tax

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system (tax rates are uniform throughout the country). Hence a number of advantages
or benefits were envisaged as an implication of GST. Reduction in tax incidence was
acclaimed as the biggest advantage of GST for consumers. For traders, the system of
input credit has been a significant provision as it helped them to pass on lower tax to
the customers and also reduce overall costing (Anonymous, 2019). Apart from this,
GST has also led to the formation of common national market, increased ease of doing
business for industries, benefits to small taxpayers, a self-regulating, transparent tax
system, complete digitalisation of tax collection, assessment and audit through the
GST network (GSTN), and reduction in multiplicity of taxes.
It has been two years now since the implementation of GST and all that the
government has to tell about the yearly assessment is that GST revenue has been high
and even more than estimated. But now reports show that revenue collections have
been falling. In 2018-19 Budget, the GST collection was estimated at Rs 7.4 lakh crore
which was revised later in 2019-20 interim budget to Rs 6.4 lakh crore. But the finance
ministry’s figures show that the actual GST collection for 2018-19 was around Rs 5.8
lakh crore, a significant shortfall of over 20 per cent compared to budget projection
(Anonymous, 2019).

However it’s only close to two years since the implementation of GST and hence it is
very early to objectively analyse the impact of the implementation of GST but, the
question about whether the economy headed in the right direction in the backdrop of
GST is imperative and can be answered by analysing the impact of GST on various
sectors in the economy today. Particularly, it is necessary to focus on and critically
analyse its positive and negative effects on Micro Small and Medium Enterprises
(MSME's), which are envisioned to be the keystone of the 'Make in India' programme.
MSME's are the driving force of the economy.

They employ nearly eleven crore people through the operation of five crore enterprises
producing a heterogeneous basket of about 7,000 different products in India (Singh,
2015). In the era of climate change this sector is likely to absorb unemployed from the
agricultural sector also. But current trends in this sector and the state of the economy
seem to provide bleak prospects for manufacturing industry in India. MSME's have
been languishing under financial, credit and modernisation problems. It is said to have
been working like an unorganised family business with non-tax compliance and hence
not providing its workers with social security benefits. Thus the flagship 'Make in
India' scheme shall deliver on its promises only if MSME sector fully formalised and
records high rates of tax compliance. Here is where GST and significance of this study
steps in as GST is likely to be the change maker in the economy for the next ten years
or so. Analysing its impact on MSME's and maximizing upon all of its benefits to
MSME's by weeding out its externality will put India's economic growth trajectory on
the right path, perhaps will help achieve a 5 trillion dollar economy.

Presently under GST system evidences show that small businesses operating under

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the composition scheme (turnover between Rs.20 lakh and Rs.75 lakh; later the limit
was raised to Rs.1.5 crore) could not give input tax credit (ITC) and if anyone bought
from them, then the buyer had to pay the tax that the small business should have paid.
This was the reverse charge mechanism (RCM). (Kumar, 2017) Also these small
businesses were not permitted to make inter-state sales and hence their market became
limited in case they were at the border of the state. E-way bills were implemented,
suspended and again resumed, but phase wise. This added to the confusion of
businesses. Thus a critical analysis of the positive and negative impact of GST on
MSME's.

CHALLENGES FOR SMALL SCALE ENTREPRENEURS:

An ample percentage of small-scale entrepreneurs are GST is not all virtuous for the
segment and their qualms may not be entirely void. The tax Impartiality that the small-
scale entrepreneurs relish may be one of the protruding reimbursements. However,
decrease in duty verge is one of the crucial Anxieties that has led them to be cautious
of the GST bill. Under the present excise tax, no duty is remunerated by a
manufacturer consuming an income of less than rupees 1.50 crores.

But pole GST execution and the exemption boundary will get expressively sunk.
During a speech at a news conference, Arun Jaitley said, that the limit can be as low as
rupees 25 lakh. As an outcome, a large number of small-scale entrepreneurs and start-
ups will be Authorized to come below the levy and will have to recompense a huge
hunk of their incomes towards tax.

Moreover, there are additional reverses to the Planned tax impartiality. GST
Government won’t separate luxury goods and standard goods. This will solid for the
small-scale entrepreneurs to contest Against big enterprises. GST is eventually
charged on stock which is not accessible for involvement praise. This will prime to an
upsurge in the price of The goods which are supplied straight to end users.

ROLE OF SMALL-SCALE ENTERPRISES IN INDIAN

ECONOMY:

The small-scale enterprises play very consequence and essential role in Indian
economy in term of the developed economy growth as well as advanced Growth of

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engagement since freedom in spite not provision from management and monetary
support.

They have to face cut terrified and very threatening Struggle and hard time with great
player in the marketplace. Since the Government is not been subsequent a policy of
registration of few inventions for Small scale enterprises entirely.

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 OBJECTIVE OF THE STUDY

➢ • To know about the awareness level of small-scale entrepreneurs towards

GST.

➢ • To know about the tax rates of small-scale entrepreneurs.

➢ • To know about the impact of GST on small scale entrepreneurs.

➢ • To know about the challenges faced by small-scale enterprises.

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 NEED & SCOPE OF THE STUDY

➢ This study is mainly done to know about tax rates of the small-scale
enterprises after the implementation of the GST and also to know whether
the turnover is been increased or not.

➢ Government has introduced various currency subsidy as well as monetary

structures to grow small scale enterprises, but regrettably the development
in Stretch for separate businesses is not very high. So, observing at
Packing features how we can recover or assistance small scale enterprises
to change.

➢ Large Scale Industry so the backing which have been provided that to
existing small-scale enterprises it can be exploited to progress new small-
scale Enterprises.

➢ Study and good-looking wrapping designs and tags not only shield the
goods from breaking and indemnities but they are also obliging in
Clutching care of the end customer.

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 LIMITATIONS OF THE STUDY

➢ • Every research study has its own limitations and present research work is no.

exemptions to this rule.

➢ • This study may be the subject to personal biases of the respondents while

answering the questionnaires.

➢ • Considering the short time duration for the survey, the sample had to be

restricted to 50 respondents only.

➢ Respondents were reluctant to disclose complete and correct information

➢ • The data has been collected from a sample of customers from the sample

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 LITERATURE REVIEW

Literature in this field, specifically on the topic of impact of GST on MSMES is very
limited. However there are some published journal articles and newspaper reports.

Scholars Prasad and Satya have theoretically listed out the positive and negative
impacts of GST on MSME's i.e. the positive impacts will be that starting business
becomes easier, improved MSME market expansion, lower logistical overheads,
reduction of tax burden on new businesses and negative impacts will be the burden of
lower threshold on tax exemption etc. (Prasad & Sathya, 2017)

Dr. Sonia and her co-authors are of the view that the government has implemented
GST with a long-term vision but it has increased the technology dependency of every
enterprise which has become a great challenge for SMEs. (Verma, Khandelwal, & Raj,
2018)

A paper released by the Confederation of Indian Industries (2015) states that the lower
threshold on tax exemption will greatly impact the SME's working capital but on the
other hand GST will also lead to expansion of MSME's market.

In another paper it's argued that after demonetisation, the introduction of GST brought
with it a fresh wave of challenges, especially for the informal sector. Along with the
initial confusion about GST forms and infrastructure glitches, there has also been
reported a delay in receiving ITC which has directly affected the MSME's. Moreover
he says that the supply chains have also been affected. (Sinha, 2018)

Further another paper states that with all the compliance procedures under GST-
Registration, Payments, Refunds and Returns now being carried out through online
portals only, SMEs need not worry about interacting with department officers for
carrying out these compliances, which were considered as a headache in the previous
tax regime. (Venkateshwarlu & Vijaylakshmi, 2018)

Another scholar has argued that India's paradigm shift to GST regime will increase
the compliance fees of MSME's and snare a majority of them into the oblique tax
internet for the first time.(Kumari, 2018)

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 Lastly, a paper states that as under the provisions of RCM if a registered person buys
goods from an unregistered trader/dealer the tax is to be paid by the registered person
and this will increase the working capital requirements of the registered persons.
Hence registered businesses will prefer to deal only with the registered businesses.
This will in turn negatively impact unregistered dealers by hampering their growth and
development (Pandit, 2017).

Most of the existing papers are theoretical, drawing inferences from secondary source
data. Thus it is evident that there is a lack of any kind empirical investigation into the
impact of GST on MSME's especially through primary data information. Hence this
paper attempts to address this research gap through empirical investigation.

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 COMPANY'S PROFILE
Small businesses are types of corporations, partnerships, or sole proprietorships
which have a small number of employees and/or less annual revenue than a regular-
sized business or corporation. Businesses are defined as “small” in terms of being
able to apply for government support and qualify for preferential tax policy. The
qualifications vary depending on the country and industry. Small businesses range
from fifteen employees under the Australian Fair Work Act 2009, fifty employees
according to the definition used by the European Union, and fewer than five hundred
employees to qualify for many U.S. Small Business Administration programs. While
small businesses can also be classified according to other methods, such as annual
revenues, shipments, sales, assets, annual gross, net revenue, net profits, the number
of employees is one of the most widely used measures.

Small businesses in many countries include service or retail operations such as

convenience stores, small grocery stores, bakeries or delicatessens, hairdressers or
tradespeople (e.g., carpenters, electricians), restaurants, motels, photographers, very
small-scale manufacturing, and Internet-related businesses such as web design and
computer programming. Some professionals operate as small businesses, such as
lawyers, accountants, dentists, medical doctors and developers (although these
professionals can also work for large organizations or companies). Small businesses
vary a great deal in terms of size, revenues, and regulatory authorization, both within
a country and from country to country. Some small businesses, such as a home
accounting business, may only require a business license. On the other hand, other
small businesses, such as day cares, retirement homes, and restaurants serving liquor
are more heavily regulated and may require inspection and certification from various
government authorities.

CHARACTERISTICS OF SMALL SCALE BUSINESSES

➢ self-employment
➢ entrepreneurship
➢ startup

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 ➢ Retailers’ cooperative
➢ Franchise businesses

ADVANTAGES OF SMALL SCALE BUSINESSES

❖ Many small businesses can be started at a low cost and on a part-time basis,
while a person continues a regular job with an employer or provides care for
family members in the home. In developing countries, many small businesses
are sole-proprietor operations such as selling products at a market stall or
preparing hot food to sell on the street, which provide a small income. In the
2000s, a small business is also well suited to Internet marketing; because, it can
easily serve specialized niches, something that would have been more difficult
before the Internet revolution which began in the late 1990s. Internet marketing
gives small businesses the ability to market with smaller budgets. Adapting to
change is crucial in business and particularly small business; not being tied to
the bureaucratic inertia associated with large corporations, small businesses can
respond to changing marketplace demand more quickly. Small business
proprietors tend to be in closer personal contact with their customers and clients
than large corporations, as small business owners see their customers in person
each week.

❖ Independence is another advantage of owning a small business. A small

business owner does not have to report to a supervisor, manager, or a board to
report to, which is the situation for a corporation’s CEO. Also, many people
desire to make their own decisions, take their own risks, and reap the rewards of
their efforts. Small business owners possess the flexibility and freedom to make
their own decisions within the constraints imposed by economic and other
environmental factors.[15] However, entrepreneurs have to work for very long
hours and understand that ultimately their customers are their bosses.

❖ Financial reporting, small businesses benefit from less extensive accounting and
financial reporting requirements than those faced by larger businesses.

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 ❖ Alternatively, the smallest companies are able to file “micro-entity accounts”.

CHALLENGES FACED BY SMALL SCALE BUSINESSES

Small businesses often face a variety of problems, some of which are related to their
size. A frequent cause of bankruptcy is under capitalization. This is often a result of
poor planning rather than economic conditions. It is a common rule of thumb that the
entrepreneur should have access to a sum of money at least equal to the projected
revenue for the first year of business in addition to the anticipated expenses. For
example, prospective owners anticipating 100,000 in revenue the first year with
150,000 in start up expenses should have at least 250,000 available. Start-up
expenses are often grossly underestimated adding to the burden of the business.
Failure to provide this level of funding for the company could leave the owner liable
for all of the company’s debt in bankruptcy court under the theory of
undercapitalization. Moreover, they face problems like:

➢ Bankruptcy
➢ Social responsibility
➢ Job quality
➢ Cyber crime
➢ Entrepreneurial Myth

FUNDINGS OF SMALL SCALE BUSINESSES

Small businesses use various sources available for start-up capital:
➢ Self-financing by the owner through cash savings, equity loan on his or her home,
and or other assets.

➢ Loans or financial gifts from friends or relatives

➢ Grants from private foundations, government, or other sources
➢ Private stock issue

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➢ Forming partnerships
➢ Angel investors
➢ Loans from banks, credit unions, or other financial institutions
➢ SME finance, including collateral-based lending and venture capital, given
sufficiently sound business venture plans

MARKETING PLAN OF SMALL SCALE BUSINESSES

Market research – To produce a marketing plan for small businesses, research
needs to be done on similar businesses, which should include desk research (done
online or with directories) and field research. This gives an insight into the target
group’s behavior and shopping patterns. Analyzing the competitor’s marketing
strategies makes it easier for small businesses to gain market share.
Marketing mix – Marketing mix is a crucial factor for any business to be successful.
Especially for a small business, examining a competitor’s marketing mix can be very
helpful. An appropriate market mix, which uses different types of marketing, can
help to boost sales.
Product life cycle – After the launch of the business, crucial points of focus should
be the growth phase (adding customers, adding products or services, and/or
expanding to new markets) and working towards the maturity phase. Once the
business reaches the maturity stage, an extension strategy should be in place. Re-
launching is also an option at this stage. Pricing strategy should be flexible and based
on the different stages of the product life cycle.
Promotion techniques – It is preferable to keep promotion expenses as low as
possible. ‘Word of mouth’, ‘email marketing’, ‘print-ads’ in local newspapers, etc.
can be effective.

Channels of distribution – Selecting an effective channel of distribution may

reduce the promotional expenses as well as overall expenses for a small business.

CONTRIBUTION OF SMALL-SCALE BUSINESSES

In the US, small businesses (fewer than five hundred employees) account for more
than half the non-farm, private GDP and around half the private sector employment.
Regarding small business, the top job provider is those with fewer than ten
employees, and those with ten or more but fewer than twenty employees comes in as
the second, and those with twenty or more but fewer than one hundred employees

22
 comes in as the third (interpolation of data from the following references). The most
recent data shows firms with fewer than twenty employees account for slightly more
than 18% of the employment. According to “The Family Business Review”, “there
are approximately seventeen million sole-proprietorship in the US. It can be argued
that a sole-proprietorship (an unincorporated business owned by a single person) is a
type of family business” and “there are twenty-two million small businesses (fewer
than five hundred employees) in the US and approximately 14,000 big businesses”.
Also, it has been found that small businesses created the newest jobs in communities,

SMEs & SMBs

Small and medium-sized enterprises (SMEs) or small and medium-sized businesses
(SMBs) are businesses whose personnel and revenue numbers fall below certain
limits. The abbreviation “SME” is used by international organizations such as the
World Bank, the OECD, European Union, the United Nations, and the World Trade
Organization (WTO).

In any given national economy, SMEs sometimes outnumber large companies by a

wide margin and also employ many more people. For example, Australian SMEs
makeup 98% of all Australian businesses, produce one-third of the total GDP (gross
domestic product) and employ 4.7 million people. In Chile, in the commercial year
2014, 98.5% of the firms were classified as SMEs. In Tunisia, the self-employed
workers alone account for about 28% of the total non-farm employment, and firms
with fewer than 100 employees account for about 62% of total employment. The
United States’ SMEs generate half of all U.S. jobs, but only 40% of GDP.

Developing countries tend to have a larger share of small and medium-sized

enterprises. SMEs are also responsible for driving innovation and competition in
many economic sectors. Although they create more new jobs than large firms, SMEs
also suffer the majority of job destruction/contraction.

According to the World Bank Group’s 2021 FINDEX database, there is a $1.7
trillion funding gap for formal, women-owned micro, small, and medium-sized
enterprises. Additionally, over 68% of small women-owned firms lack access to
finance.

Major players of the industry

➢ Manufacturing/production

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 ➢ Ancillary
➢ service industries
➢ Incense Sticks and Camphor-making
➢ Coaching classes
➢ Indian Handicrafts
➢ Spices

GOVERNMENT SUPPORT TO SMES & SMBS

The contribution of small industries and businesses to the Indian economy is simply
immeasurable. They not only create wealth and employment but are also a big factor
in social development. In fact, so great is their importance that we have a special
ministry dedicated to Micro, Small and Medium Industries. The Indian government
has been supporting and developing small unit sectors. India is focusing on rural
industries and cottage industries. According to layman’s language, a small business
is a project or venture that requires a small budget or is run by small group of people.

Both central and state government have been emphasizing more on self-employment
opportunities in rural sectors by providing help and support in financing in terms of
loans, training in terms of programs, infrastructure, raw materials and technology.

The core purpose of the government is to utilise the local manpower and locally
available resources. Which are further transformed into action by local departments,
agencies, corporations, etc. The support of small industries include:

❖ Institutional Support

1. National Bank for Agriculture and Rural Development (NABARD)

2. A Rural Small Business Development Centre (RSBDC)

3. National Small Industries Corporation (NSIC)

4. Small Industries Development Bank of India (SIDBI)

5. The National Commission for Enterprises in the Unorganised Sector (NCEUS)

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6. World Association for Small and Medium Enterprises (WASME)

7. Rural and Women Entrepreneurship Development (RWED)

8. Scheme of Funds for Re-generation of Traditional Industries

❖ Incentives

The government of India focuses more on the economic and industrial development
of backward, hilly and tribal areas of India. Committees have been established to
attest and support the growth of small-scale industries and business units and to
suggest schemes that are needed.

The programs and schemes vary from state to state. Together they form a package of
benefits and incentives to attract industries in the backward areas. Small industries
receive various benefits from the government of India such as Land, Power, Water,
Sales Tax, Octroi, Raw materials, Finance, Industrial estates and Tax holiday. Even
though enough importance is given to backward areas and small industries, there is
still an imbalance in their economic growth.

❖ Future

World Trade Organisation facilitates the trades of the present era and there are many
reforms as per global expectations. The WTO system contributes to development. On
the other hand, developing countries need flexibility in the time they take to
implement the system’s agreements.

India is diligent in the framework of World Trade Organisation as it is one of the

founder members. Because of it, Indian economy is integrated with the global market
and small business can explore capabilities and establish new markets. Indian
businesses have to reform over time to keep up with the world’s standard.

With the entrepreneurial spirit, small industries have to adapt to the changing needs
of the market driven economy. The government should explore new strategies that
encourage partnership between small and large industries.

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 RESEARCH METHODOLOGY

STATEMENT & SIGNIFICANCE OF PROBLEM:

SSIs are a major driver in the Indian economy, contributing almost more than, it
accounts for nearly 40% of the country’s industries production, 42% of
Exports and 65% of the employment opportunities. But in the last year government of
India made great reform in indirect taxation system by introducing
GST. From onwards major changes and challenges occurred in the functioning of
SSIs. Hence this study concentrated to explore how that GST imposing
Challenges and created opportunities to the SSIs sector in India.

RESEARCH DESIGN & SAMPLE SIZE:

This study is based on primary data collected with the help of structured questionnaire.
Purposive sampling has been adopted for the selection of sample. Data has been
collected from 59 respondents.

All of the respondents were small scale industries (SSl’s) or had started as SSl’s (but
have grown bigger now) and are mostly into manufacturing of very diverse products
like machine tool components, transformers, electromagnets, industrial chemicals,

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paints, rubber moulded and extruded components, automobile components, plastic
injection moulding, bathroom plumbing accessories and fixtures etc.

Apart from the survey, insights from the GST panel chairman in Peenya, Assistant
Secretary of Karnataka Small Scale Industries Association (KAASIA) and Joint
Commissioner of Taxes have also been recorded. The area of study is Peenya
industrial area which is the heart of industrial activities in the Bengaluru (urban)
district. Data analysis is done with the help of ratios and percentages.

There are various statistical tools which are used in analysing data.
The following tools are used for representing and analysing data.

Descriptive research is used in this study in order to identify the lending practices of
bank and determining customer’s level of satisfaction. The method used was
questionnaire.

Sampling Unit: The Study population includes the of customers of GST and Sampling
Unit for Study was entrepreneurs.
Sampling Size:59 Respondents.

COLLECTION OF DATA:
Primary data: Primary Data was collected from various people and their opinion and
information for the specific purposes of study helped to run the analysis. The data
Was collected through questionnaire to understand their experience and preference
towards GST.9
Secondary data: ➢ Books
➢ Articles and research paper
➢ Internet and Wikipedia

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 DATA ANALYSIS & INERPRETATION:

Before analysing the impact of GST it would be appropriate to have an understanding

regarding the various aspects of the business in the given context. This has been
explained in terms of the nature of business activity, number of years of working
experience of the respondents etc. This would be helpful in terms of understanding the
effect of GST on the selected respondents.

From the Table 1 that majority of the firms (83.1%) were in the given business for
more than 10 years and only 16.9% had an experience below 10 years.

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 It is evident from Table 2 that majority of the respondents (76.3%) had a working
experience in the range of 10-30 years. Only 6.8% i.e. just 8 of them had less than 10
years of working experience while 16.9% had plus 30 years of working experience.

From Table 3 it can be seen that 61% of the firms had an employee strength between
10 and 30 during the survey period. Only 18.6% had employee strength of above 30
while 20.3% had an employee strength of less than 10.

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Table 4 presents the annual turnover of the sample units. Majority, i.e. 66% of the
surveyed industries had an annual turnover ranging between 45 lakhs to 1.5 crore,
16.94% of the firms had a turnover ranging from 1.5 crore to 5 crore. There were only
5 industries with a turnover of more than 5 crore.

Table 5 presents the impact of GST on the prices of the industrial product. It was
believed that after the implementation of GST consumers will benefit because of the

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low price of the products. The survey results confirm this expectation. 37.3% opined
that there was a decrease in the price of the industrial products in the post GST period.
While 18% was of the opinion that the price has increased in the post GST whereas
19% claims that there was no change in the prices after the GST implementation.

The effect of GST on monthly sales of the firms has been represented in Table 6.
Majority of the respondents (45.8 percent) were of the opinion that there was an
increase in the average monthly sales in the post GST period while 40.6 percent
opined that there was no change in the average mnonthly sales after the tax change,
however they expected a positive change post GST. 13.6 percent were of the view that

there was a decrease in the sales in the post GST period.

In the pre-GST regime, traders had to comply with the rules and regulations of various
tax departments and laws. One of the acclaimed advantages of GST was that it will
improve the tax compliance of the tax payers. Increased tax compliance was expected

31
to increase the taxX revenue. But the results of the survey presented in Table 7 shows
that there is not much change in the tax compliance in the post GST regime. 67.8
percent of the respondents were of the opinion that there is no change in the tax
compliance as they were already regular tax payers while 16.9 percent agreed with the
view that there as an improvement in the tax compliance.

Table 8 shows the effect of GST on the production and distribution and it is clear that
50.8 percent of the respondents agreed with the fact that there was no improvement in
the production and distribution in the post GST era. However, 47.5 percent responded
by saying that in the post GST period there is positive effect on the production and
distribution of goods.
Questions were also asked with respect to the regular disbursal of the Input Tax Credit
(|ITC), the results of which has been given under Table 9.

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Table 9 shows the response with respect to the disbursement of ITC credit to the
respondents. Majority of the respondents (66.1 percent) agreed that there is a timely
disbursement of ITC, while 27.1 percent expressed the view that there is sometimes, a
delay in the disbursement of ITC. Only 4 percent of the sample respondents opined
that they were not getting the ITC credit regularly at all.

According to the respondents, this delay in the ITC credit has led to cash crunch and
adversely affected the working capital requirement. It is also to be noted that all the
respondents were in the |TC scheme rather than in the composition scheme.

The survey has revealed that 34 percent of the respondents were not eligible for the
composition scheme as they have surpassed the turnover limit while 66 percent didn’t
opt for the composition scheme. Reasons cited for opting out of the composition
scheme was an expectation of regular crediting of ITC and that in the post GST regime
they can avail the full amount of ITC in the year of purchase while in the former tax
regime only 50 percent of the ITC against purchase of capital goods was available in
the year of purchase.

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Since GST has introduced E-Way bill and the reduction in the multiplicity of taxes it
was expected that the cost of doing business Would be less the in the post GST era.
However, the results of the survey presented in Table 10 shows that the actual results
were in Contradiction to the expectation. 54.2 percent of the respondents opined that
there was no reduction in the cost of business in the post GST while 45.8 agreed that
the cost of doing business has actually come down in the changed tax regime. Here it
is to be understood that the adverse conditions of the economy has acted against the
benefits of GST as evident later in table.

Table 11 shows that impact of the introduction of E-Way bill under GST. E way bill
was introduced to ensure a hassle free movement for transporters and also to reduce
tax evasion with respect to interstate sales. A major proportion of the respondents were
involved in interstate sales. Majority (84.7 percent) were of the opinion that the E-Way
bill has brought transparency in the transaction and only 15.3 percent didn’t agree to

34
this view point.
Since GST has got a dual tax structure insights were also drawn in terms of the effect
of this dual system which is given in Table 12. A majority (57.6 percent) of the
respondents opined that the dual administration had been creatinga bureaucratic
pressure and reducing the ease of doing business. But 42.4 percent responded that they
faced no problem with the dual administration.

It is clear from Table 13 that 79.7 percent of the respondents agreed with the view that
there was an improvement in the interstate sales transaction due to the simplification
of procedures as well as the reduction in the delay of transportation of goods. Survey
also revealed that before the implementation of GST, these manufacturers had to spend
extra amount of money to bribe the officials to smoothen the process of interstate
transaction.

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 But in the new tax system the extent of bribery has actually come down. 79.7 percent
agreed that there is a reduction in the bribery to the officials in the post GST era. The
results of this finding is indicated in Table 14.

Apart from the effect of GST on the functioning of firms, the study also tried to assess
the nature of IT issues which the respondents are facing in the context of filing of GST
which has been explained in the following section.

Table 15 shows that 66.1 percent of the respondents were happy with the online portal

36
related to tax payment as they didn't face any issues related to the filing of tax. They
also mentioned that the new taX regime has also led to a reduction in the cumbersome
procedure and documentation related to tax payment. But 32.2 percent claimed that
they are facing issues related to the GST filing.

Responses were also collected with respect to the ease of doing business in the post
GST period. From Table 16 it is clear that 86.4 percent agree with the statement that
there is an increase in the ease of doing business in the new regime as the number of
documentation and cumbersome procedure is low.

Under the Reverse Charge Mechanism (RCM), the recipient of the goods and/or

37
services is liable to pay GST instead of the supplier. RCM is applicable in four cases
‘of supply. (Laddha & Patwari, 2017) The implementation of RCM has invited a lot of
discussion from the organised sector, small traders and the government as it will
increase the working capital, compliances etc for big players, small players may be
burdened while the government aims to increase the tax base.

In order to reduce the complications most of the registered business would try to deal
only with the registered dealers. This can hamper the growth of the small scale
unregistered dealers who might have entered the tax system at a later stage. When the
respondents were asked to give their opinion on the reverse charge 54.2 percent were
not in agreement with the introduction of this, while 39 percent were willing to opt for
RCM. These results have been given in Table 17.

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 FINDINGS

➢ The majority 78.00% of respondents are between the age group of

25-30.
➢ The majority 54.00% of respondents are male.
➢ The majority 62.00% of the respondents have average turnover of
20 lakh
➢ The majority, 92.00% of respondents have trained people for
software updation.
➢ The majority, 68.00% of respondents have increased turnover status
after the implementation of GST.
➢ The majority, 64.00% of respondents thinks they were confused of
newly implemented GST.
➢ The majority, 66.00% of respondents think the sentence and
wording in GST guide is lengthy and not user friendly.
➢ The majority 34.00% of respondents thinks that competitors are the
major constraints to the growth of small-scale industries.
➢ The majority, 36.00% of respondents stated that Personal savings is
your major source of funding.
➢ The majority, 26.00% of respondents opted towards private limited
company Frequency distribution of forms of participants of small-
scale industries.
➢ The majority, 34.00% of respondents have 10-15 employees in the
firm.
➢ The majority, 50.00% of respondents have 1, 00,000-2, 00,000
average monthly turnover.
➢ The majority, 62.00% of the respondents think GST affects the
capital stock market operations.
➢ The majority, 86.00% of respondents stated that GST is a fair tax
system.
➢ The majority, 92.00% of respondents have faced technical issues
while filing GST.

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 RECOMMENDATIONS

❖ Government has to create awareness regarding rules, regulations, and

compliances of GST by arranging workshops, seminars, conferences to
educate proprietors of SSIs.

❖ Government of India should have to increase threshold limit from 20

lakhs to 1.5 crores hence that reduces tax burden to small businesses.

❖ Government has to take initiative measures to reduce compliance cost.

This will help full to lower their product prices.

❖ GST is IT backed infrastructure that needs necessary training to the

employees hence Government should provide necessary training facility
to employees and proprietors of SSIs.

❖ The business is in different states needs separate registration may

increases compliance cost hence one registration should be there for entire
business. That encourages business to diverse their business activities
beyond their states.

❖ Government must ensure easy compliances of GST because that

reduces errors and confusions in the minds of traders of SSIs.

❖ Exemption should be given to certain products of small industries in

order encourage small traders in the country.

❖ Government has to minimize tax rates imposed on small scale industry

produced products.

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 CONCLUSION

Unarguably, GST rollout will open up a can of worms and the effect on SMEs
throughout numerous industries will vary substantially. It’s far quite herbal For a
pervasive, country-wide tax reform, as GST is, to have a blended opinion.

Moreover, the revolutionary tax regime may have reputation with a view to
range from kingdom to kingdom. The only nation, one tax principle underlying
Goods and Services Tax (GST) roll out is predicted to benefit small scale
businesses (SSIs) in long run. Presently, majority of SSIs gamers areunregistered
in order to avoid paying tax and meeting compliance requirement.

If they reach threshold restrict underneath a tax law, it looks to cut up the firm there
was a dire need to integrate India into one economy and get rid of The multiple taxes
and its cascading effect. Introduction of GST resulted in simplification of indirect tax
system in the country and thereby ensures Seamless business transactions across our
nation and world over.

On the arrival of GST, the SSIs sector has forced to revamp their strategies, systems,
Supply chains and costing apart from meeting the quality standards as per the inter
national norms. So far, unorganised SSIs have grown faster than organized Peers
because of lower cost structures stemming from tax benefits, (if turnover is less than
₹1.5 crore).

India’s paradigm shift to the Goods and Services Tax (GST) regime brought majority
of SSIS’s into the indirect tax net for the first time and thereby increased compliance
costs for SSIs. Complying with GST is bit complex for SSIs at present. However, in
the long run it will benefit small and medium businesses as well as consumers. The
overall impact Of GST on SSIs sector has to be reviewed by the Centre and the States
periodically, and any adverse impacts observed should be addressed at appropriate
Times for the success of new tax regime.

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 BIBLIOGRAPHY

• Magazine
• Internet
• IPEX Times
• Verma, A., Khandelwal, P., & Raj, S. J. (2018). Impact of GST on Regulation
of Small Businesses. IOSR-Journal of Business and Management.
• Pandit, S. (2017). GST: Opportunities and challenges for Indian SME’s.
Inspira – Journal of Commerce, Economics and Computer Science.
• Prasad, D. I., & Sathya, D. K. (2017). Impact of GST on MSME’s. Journal of
Management and Science.
• Singh, C. (2015, September 11). Utilizing MSMEs as engines for growth. The
Hindu.
• Venkateshwarlu, M., & Vijaylakshmi, G. (2018). Impact of GST on Micro,
Small and Medium Enterprises (MSMEs). International Journal of
Engineering and Management Research.

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 QUESTIONNARIE

Name…………………………. Age………….

Occupation…………………... Qualification…………............

1. Age of the Sampling Firms

a) Less than 10 years
b) 10 to 30 years

2. Work Experience of the Respondents

a) Less than 10 years
b) 10 to 30 years
c) More than 30 years

3. Total Number of Employees

a) Less than 10
b) 10 to 30
c) More than 30

4. Annual Turnover of the Enterprise

a) 45lakhs to 1.5 Cr
b) 1.5 to 5 Cr
c) 5Cr to 10 Cr
d) More than 10 Cr

5. Impact of GST on Industrial Product Prices

a) Decrease
b) Increase
c) No change

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 6. Impact of GST on Monthly Sales
a) Decrease
b) Increase
c) No change

7. Impact of GST on tax compliance

a) Decrease
b) Increase
c) No change

8. Effect of GST on Production and Distribution Chain

a) positive
b) Negative
c) No improvement

9. Impact of GST on timely disbursement of ITC credit to the respondents

a) Yes
b) No
Delayed sometimes

10. Impact of GST on Cost of Business Reduction

a) Yes
b) No

11. Was there transparency in E-way bills

a) Yes
b) No

12. Was there transparency in dual structure

a) Yes
b) No

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13. Improvement in the interstate sales transaction due to the simplification of
procedures
a) Yes
b) No
c) N.A.

14. GST and reduction of Bribery in Interstate Sales

a) Yes
b) No
c) N.A.

15. GST and online Portal Issues

a) Yes Faced problems
b) No problems at all
c) Yes, problem with filing GST return also

16. Impact of GST on ease of Doing Business

a) Decrease
b) Increase

17. GST and Reverse Charge Mechanism

a) Risky
b) Avoided but necessary at times
c) Willing to opt for RCM

Thanks for Your Corporation

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