Impact of GST on MSME Export Performance in India: Secondary Data Evidence (2017–2023)
DOI: https://doi.org/10.5281/zenodo.23154264
Aftab Alam, Amol Parmeshwar Kamble
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Keywords:
GST, MSME Exports, Difference-in-Differences, Input Tax Credit, VAR, India, Indirect Tax Reform, Formalisation, Export Competitiveness.
Abstract:
This study aims to analyse the causal and dynamic effects of the Goods and Services Tax (GST), which was implemented on 1 July 2017, on the export performance of Micro, Small and Medium Enterprises (MSMEs) in India from 2014-15 to 2022-23. The paper uses Descriptive Trend Analysis, Difference-in-Differences (DID) model, Panel Data Fixed Effects model and the Vector Autoregression (VAR) model, based on the official secondary data sourced from Directorate General of Commercial Intelligence and Statistics (DGCI&S), Reserve Bank of India (RBI) and Press Information Bureau (PIB). The results validate the positive causal impact of GST on MSME exports, with the DID coefficient value being statistically significant at USD 22.74 billion per year, which is above the pre-GST trend. The VAR model shows that cost shocks to compliance have an immediate negative impact on exports, while the positive impact of compliance formalisation dividends occurs by lag three. The compliance burden, however, is disproportionately high for micro enterprises, and the structural export ineligibility of the Composition Scheme is a major policy conflict that needs to be resolved. The paper adds to the scanty causal literature on GST and MSME internationalisation in India that spans the longitudinal period.