A Synopsis
On
THE ROLE OF TAXATION BUSINESS GROWTH: ANALYZING THE
IMPACT ON SMEs IN INDIA – S. P. ENTERPRISES
Submitted to
School of Commerce and Management
Yashwantrao Chavan Maharashtra Open University
Nashik.
As partial fulfillment for the award of
Master of Business Administration (MBA)
By :
Shweta Prakash Jadhav
PRN: 2023017000724395
Under the Guidance of
PROF. DR. K. N. PATIL
Padmabhushan Dr. Vasasntraodada Patil Mahavidyalaya, Tasgaon
Tal – Tasgaon, Dist: Sangli
Through
The Coordinator
Study Centre Code – MBA 72146
2024
Company Profile
Name : S.P. Enterprises
Address : A/P (Shinde Galli), Tal-Tasgaon,
Dist – Sangli, 416312 (Maharashtra)
Telephone : 9689713023
E-mail : prakashjadhav102030@[Link]
a) Introduction, Importance and
Significance of Study
Introduction: -
Small and medium enterprises (SMEs) are crucial for the economic
development of nations globally. SMEs have a significant role in India,
as they make a big impact on employment, export earnings, and
industrial output. The Ministry of Micro, Small, and Medium Enterprises
(MSME) states that the sector contributes around 30% to the country’s
gross domestic product (GDP) and provides employment to over 110
million individuals (Ministry of MSME, 2021). The objective of this study
is to analyse the role of small and medium-sized enterprises (SMEs) in
driving India’s economic growth, with a specific focus on their influence
on employment, innovation, and regional development.
India’s SME sector, comprising a diverse range of industries such as
manufacturing, services, and agriculture-related businesses,
significantly bolsters its economic structure. The flexibility and
adaptability of SMEs enable them to respond swiftly to changing
market conditions, thereby sustaining economic dynamism (Kumar &
Rao, 2015). Additionally, SMEs contribute to the decentralization of
economic activities, promoting balanced regional development, and
reducing disparities between urban and rural areas (Das, 2017).
The innovation capacity of SMEs is another critical factor contributing
to their economic significance. Despite limited resources, SMEs often
engage in incremental innovations that enhance productivity and
efficiency. These innovations can lead to significant competitive
advantages in the global market, particularly in niche segments where
large enterprises may not have a presence (Ray & Ray, 2011).
Furthermore, SMEs serve as a critical source of entrepreneurial talent
and innovation, fostering a culture of entrepreneurship that drives
long-term economic growth (Acs, 2006).
The government’s supportive policies have also played as essential
role in strengthening SME sector in India. Initiatives such as the Make
in India campaign, Startup India, and various credit facilitation schemes
have provided much-needed support to SMEs, helping them overcome
challenges related to financing, technology adoption, and market
access (Ministry of MSME, 2021). These policies aim to foster an
environment that fosters SMEs’ growth and their contribution to the
national economy.
SMEs are indispensable to India’s economic framework, driving growth
through employment creation, innovation, and regional development.
This study will delve deeper into these aspects, providing empirical
evidence and policy recommendations to further enhance the
contribution of SMEs to India’s economic growth.
Importance: -
1. Ease of starting a business –
SMEs have operations in various states of India that require VAT
registration. Different tax rules prevailing in other states added to
the complications. With centralized registration. GST has eased the
process of starting a business and consequent expansion. With GST
reducing the process of creating a business, we can see a spike in
SME loans in India from an alternate class of lenders such as NBFCs.
2. Low tax burden and ease in the filling process –
Before GST, SMEs had to deal with the multiple taxation systems
prevailing in the country. GST wiping out all the cascading taxes,
the tax burden has been reduced to over 60% of small dealers and
traders.
In its latest meeting, the GST council hiked the threshold turnover
for the composition scheme allows SMEs to pay 1-5% tax without
going through cumbersome and tedious formalities.
With the government easing the processing of filling for SMEs with a
turnover of Rs.1.5 crores from monthly to quarterly. It would
provide much needed relief to the sector.
3. Improved Logistics –
Under GST, there will be no entry tax on goods sold in any part of
India. This will expedite the movement of goods across the nation,
improving logistics. According to CRISIL, this will reduce logistic
costs by approximately 20%.
With GST in place today, small business owners do not need to pay
octroi taxes while sending goods from one state to another. This
has expedited the movement of goods manifold.
4. No distinction between Goods and Services –
While earlier, businesses providing goods and services had to
calculate VAT and service taxes individually, GST has eased the
process by eliminating the ambiguity between the tow.
This is one of the significant benefits of the new tax regime as this
will simplify proceedings related to packaged products. With no
distinction between the two, it will go a long way in reducing tax
evasions. SMEs need to calculate tax only on the final product that
will lead to more straightforward invoicing.
Significance of Study: -
This study’s significance lies in its comprehensive analysis of
the contribution of small and medium enterprises (SMEs) to India’s
economic growth and identification of the challenges they face. SMEs are
crucial to the Indian economy, contributing significantly to GDP,
employment, and export earnings (Mukherjee, 2018). This study aims to
highlight the importance of SMEs and provide insights into enhancing their
growth and sustainability through targeted policy interventions.
Understanding the economic contribution of SMEs is critical for
policymakers, business leaders, and scholars, as they contribute
approximately 30% to India’s GDP and employ over 110 million people
(MSME, 2020).
b) Rationale
Taxation plays a crucial role in business growth, particularly
for SMEs in India, influencing their ability to invest, innovate,
and compete, with the Goods & Service Tax (GST) aiming to
simplify the system and potentially boost efficiency, but also
presenting challenges in terms of compliance.
c)Objectives
1. To measure the extent of small and medium-sized enterprises’
(SMEs) impact on India’s gross domestic product (GDP).
2. To analyze the role of SMEs in employment generation and
regional development.
3. To evaluate the impact of SMEs on India’s export earnings and
international trade.
4. To assess the level of innovation and competitiveness among
Indian SMEs.
5. To identify the major challenges hindering the growth and
sustainability of SMEs, including access to finance, infrastructure,
and regulatory issues.
6. To suggest policy interventions and support mechanisms that
can enhance the growth and contribution of SMEs to India’s
economic prosperity.
d) Hypotheses
H0A : There is no association between the type of enterprise
and their perception of GST law.
H1A : There is an association between the type of enterprise
and their perception of GST law.
H0B : The acceptance towards GST is similar across all types of
enterprises.
H1B : The acceptance towards GST is not similar across all
types of enterprises.
H0C : There is no relationship between GST Awareness, GST
Satisfaction, and Perceived Impact of GST among MSME
owners.
H1C : There is relationship between GST Awareness, GST
Satisfaction, and perceived Impact of GST among MSME
owners.
e) Research Methodology
a. Data Collection Method
This study will employ a mixed-method approach, combining
both primary and secondary data collection methods for a
more comprehensive
understanding.
i. Primary data-:
Surveys and Questionnaires: Structured online or paper-based
surveys can be distributed to SME owners or managers to
gather data on their experiences with GST compliance,
financial performance, and operational changes post-
implementation.
ii. Secondary data -:
Government Data: Publicly available data from government
agencies like the Ministry of MSME and the Goods and
Services Tax Network (GSTN) can provide insights on tax
collection trends, credit disbursement to SMEs, and overall
economic activity.
Industry Reports and Research Papers: Existing research on
the impact of GST on SMEs and relevant industry reports can
provide valuable context and background information.
f) Expected Contribution
SMEs (Small and Medium Enterprises), also known as MSMEs
(Micro, Small and Medium Enterprises), are vital to India’s
economy, contributing significantly to employment, exports,
and overall economic growth, particularly in rural and semi-
urban areas.
Here’s a more detailed look at the impact of SMEs in India:
Economic Contributions:
Job Creation and Employment:
MSMEs are a major source of employment, providing jobs to a
large portion of the Indian workforce, particularly in rural and
semi-urban areas.
Contribution to GDP and Exports:
MSMEs contribute significantly to India’s Gross Domestic
Product (GDP) and exports, playing a crucial role in the
country’s economic growth.
g) Chapterlization
Chapter I : Introduction to the study and The Role of Taxation
in Business Growth : Analyzing the impact on SMEs in India –
S. P. Enterprises
Chapter II : Company profile.
Chapter III : Importance & Significance of Study
Chapter IV – Theoretical Background
Chapter V : Data presentation and interpretation analysis.
Chapter VI : Finding and suggestion & Conclusion .
Chapter VII : Employee Survey & Questionnaire
h) Bibliography
1. Sharma (December 2017) in his work entitled “A Study of Impact
of GST on Micro, Small and Medium Enterprises – A Critical
Analysis”.
2. Franco and Chellammal (June 2018) in their work entitled “GST –
Positive and Negative Impacts on Small Scale Industries”.
3. Jayalakshmi and Venkateshwarlu (April 2018) in their study
entitled “Impact of GST on Micro, Small and Medium Enterprises”.
4. GST Books