Impact of Goods and Services Tax on the Performance of Small - Scale Textile Manufacturing Units in Uttar Pradesh

Abstract

The Goods and Services Tax (GST), implemented in India since 1st July 2017, can be regarded as an important indirect tax reform which seeks to create a uniform market, overcome the problem of cascading effect and boost tax compliance. While GST has brought some simplicity to the tax system, there are many discussions about how this tax affects Micro, Small and Medium Enterprises (MSMEs), paying special attention to small scale textile industries. There are a lot of small scale textile industries in the state of Uttar Pradesh, India that have significant contribution in generating employment opportunities, industrial growth and economic development. In this research paper the focus will be made on the effect of the Goods and Services Tax on the performance of these manufacturing industries. Quantitative approach is chosen to conduct the research, and the empirical analysis will be done by collecting the primary data by means of structured questionnaire among the owners and managers of selected textile manufacturing industries in Uttar Pradesh. The study will analyze the effect of GST on cost of production, sales, profitability, working capital management, tax compliance and business competitiveness. Descriptive statistics and analytical methods will be used to interpret the results. It is expected that despite the positive effects of GST on improving tax transparency, interstate trade effectiveness and formalization of the business process, there are still many problems with compliance costs, electronic return filing and Input Tax Credit refund that adversely affect the financial performance of small-scale manufacturers.