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Formalising the Informal through GST: Evidence from a Survey of MSMEs

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  • Sangeeta Ghosh

Abstract

In this study, the processes and channels through which an indirect tax reform has impacted micro, small and medium enterprises in India are identified using a field survey of small businesses. The Goods and Services Tax introduced in 2017 in India has been a significant departure from the past to impact businesses and business practices in a way that introduces formal practices into the everydayness of small businesses. This study shows that established informal mechanisms have been disturbed, which has led to coping mechanisms that have borne adverse outcomes for small businesses and workers involved in them. The benefits from such a move have been rather limited for small businesses. This study advocates that the quest to transition from an informal to a formal economy is one where many small steps must be first identified, and necessary handholding and training for the vulnerable units must be provided for inclusive development.

Suggested Citation

  • Sangeeta Ghosh, 2022. "Formalising the Informal through GST: Evidence from a Survey of MSMEs," Review of Development and Change, , vol. 27(2), pages 150-169, December.
    • Handle: RePEc:sae:revdev:v:27:y:2022:i:2:p:150-169
    DOI: 10.1177/09722661221130138
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    References listed on IDEAS

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    1. repec:idq:ictduk:13663 is not listed on IDEAS
    2. Anuradha Joshi & Wilson Prichard & Christopher Heady, 2014. "Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research," Journal of Development Studies, Taylor & Francis Journals, vol. 50(10), pages 1325-1347, November.
    3. Ravi Kanbur & Michael Keen, 2014. "Thresholds, informality, and partitions of compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 536-559, August.
    4. Jeemol Unni, 2018. "Formalization of the Informal Economy: Perspectives of Capital and Labour," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(1), pages 87-103, March.
    5. Pallavi Roy & Mushtaq H. Khan, 2021. "Digitizing Taxation and Premature Formalization in Developing Countries," Development and Change, International Institute of Social Studies, vol. 52(4), pages 855-877, July.
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    Cited by:

    1. Shacheendran V, 2024. "An Analysis of GST Barriers Faced by Business Owners in India: An ISM Approach," Metamorphosis: A Journal of Management Research, , vol. 23(1), pages 46-61, June.

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