IMPACT OF GST ON MSMES AND INDIA'S FORMAL ECONOMY

MSMEs make up close to 30% of India's GDP and employ around 20 crore people, so how GST affected them isn't a niche question - it's close to the center of the economy. This paper moves past the "one nation, one tax" slogan to look at what actually happened: the promise of simplified compliance and a nudge toward formalisation through Input Tax Credit, versus the reality of GSTN portal crashes, new compliance costs for small firms, and working capital getting stuck in refund delays, especially for exporters. Drawing on real examples from sectors like textiles, the paper argues that GST has been neither the disaster its critics claim nor the clean formalisation win the government's messaging suggests - it's been a costly, uneven adjustment. It ends by calling for better data that distinguishes between merely "having a GST number" and actual formalisation in the fuller sense: payroll compliance, credit access, and job security.