Digital Taxation in India: GST Compliance Challenges for Small Enterprises

Abstract

The rollout of the Goods and Services Tax (GST) marked a major shift in India’s indirect tax system, emphasizing digital compliance through online registration, return filing, and invoice matching. While the reform aimed to simplify the tax process, it has posed significant challenges for small enterprises, particularly in regions like Delhi-NCR where digital capabilities vary widely. This study investigates the level of digital preparedness among 100 small enterprises and evaluates their ability to comply with GST norms post-implementation. Using structured questionnaires and quantitative analysis, key variables such as digital literacy, software adoption, and reliance on external professionals were examined. The results indicate that digital literacy is a more reliable predictor of GST compliance than mere use of digital tools. While outsourcing compliance is common, it does not contribute to long-term digital self-sufficiency. The paper highlights a need for targeted digital training, simplified GST platforms, and policy incentives to support self-reliant compliance among small businesses. The findings offer valuable insights for policymakers aiming to bridge the digital divide in India’s tax system.