New Delhi, August 04, 2026: Nearly a decade after the introduction of the Goods and Services Tax (GST), India’s small businesses acknowledge that the reform has transformed the country’s indirect tax landscape. By creating a unified national market and improving tax compliance, GST has become one of India’s most significant economic reforms.
But for millions of MSMEs—the country’s largest employers and entrepreneurs – the journey is far from complete. As businesses expand across states, embrace digital commerce and integrate into national supply chains, many are spending more time and resources navigating compliance than growing their businesses. The next phase of GST reforms, therefore, is no longer about tax rates but about making compliance simpler, fairer and more predictable.
Reflecting feedback from MSMEs across the country, the Federation of Indian Micro and Small & Medium Enterprises (FISME) has proposed practical reforms to reduce compliance costs, unlock working capital, improve certainty and strengthen voluntary compliance without diluting tax enforcement. Anil Bhardwaj, Secretary General, FISME, said: “GST has undoubtedly transformed India’s indirect tax system by creating a unified national market. As the system matures, the focus must shift towards making compliance simpler, more predictable and less burdensome for honest taxpayers, particularly MSMEs. Our recommendations do not seek any relaxation in tax obligations. They aim to reduce compliance costs, improve certainty, unlock working capital, strengthen voluntary compliance and make GST administration more efficient, transparent and taxpayer-friendly.”
When Honest Businesses Pay the Price for Someone Else’s Default
One of the biggest concerns for MSMEs is the growing uncertainty around Input Tax Credit (ITC). Genuine buyers are increasingly being denied ITC because suppliers default on tax payments, lose registration retrospectively or because of irregularities further up the supply chain—circumstances beyond their control. According to FISME, expecting MSMEs to monitor suppliers’ future tax compliance is neither reasonable nor practical. The industry body therefore recommends a statutory Safe Harbour for bona fide purchasers, ensuring businesses with valid tax invoices, proof of receipt of goods or services, banking-channel payments and no evidence of fraud are not penalised for someone else’s default. Recovery, it argues, should focus on the errant supplier.
Working Capital Shouldn’t Be Locked in Government Systems
Delayed GST refunds continue to lock up working capital, particularly for exporters and businesses affected by inverted duty structures. While larger companies may absorb such delays, for MSMEs they can directly affect liquidity and production. FISME urges the Government to introduce a time-bound refund mechanism with refunds processed within 30–45 days, automatic interest on delays and simplified procedures for accumulated Input Tax Credit.
Growing Across India Shouldn’t Mean Growing Compliance Burdens
As businesses expand across states and embrace e-commerce, GST compliance has become increasingly fragmented. Multiple registrations, tax authorities and varying registration procedures continue to raise compliance costs. FISME calls for faster implementation of the One PAN–One Administration framework, enabling optional centralised compliance and pooling of Input Tax Credit across registrations. It also advocates uniform registration procedures under the Home State Principal Place of Business (HPPOB) model.
Technology Should Enable Compliance, Not Complicate It
GST compliance is technology-driven, yet businesses often struggle to keep pace with frequent portal changes introduced with little notice. To improve preparedness, FISME recommends publishing an annual GST technology roadmap, allowing three to six months for major changes, enabling sandbox testing and providing penalty-free transition periods during implementation.
Reducing Disputes Benefits Both Taxpayers and Tax Administration
Businesses continue to face multiple notices arising from technical mismatches and overlapping proceedings. FISME believes GST administration should prioritise resolution over litigation. It recommends faceless adjudication, mandatory pre-notice reconciliation, consolidated notice dashboards and issue-wise electronic proceeding locks to prevent matters from being repeatedly reopened. It has also sought a facilitative approach towards bona fide procedural errors made during the early GST and COVID years.
Making GST Compatible with the Digital Economy
With digital commerce becoming a major growth engine for MSMEs, FISME argues that GST procedures must evolve alongside modern business models and recommends treating amendments relating to Additional Places of Business as self-approvable changes and replacing mandatory paper invoices accompanying B2C shipments with secure QR code-based digital documentation. It also calls for resolving persistent mismatches between ICEGATE and GSTN data for importers through automated reconciliation mechanisms.
Predictability Is the Real Ease of Doing Business
Ultimately, FISME believes the next phase of GST reforms should allow businesses to spend less time navigating procedural uncertainty and more time investing, hiring and growing. The industry body has recommends greater administrative consistency through national guidance notes, mandatory speaking orders, meaningful personal hearings, risk-based assessments and regular capacity building of field officers to reduce disputes and improve taxpayer confidence.
FISME believes that these reforms represent the natural evolution of GST—from establishing a common tax regime to building one that actively supports enterprise growth. For India’s millions of MSMEs, reducing compliance friction is not merely an administrative improvement; it is an economic imperative that can strengthen competitiveness, improve liquidity and make doing business significantly easier.