IMPACT OF INPUT TAX CREDIT ON WORKING CAPITAL REQUIREMENTS OF MSMES IN INDIA: AN EMPIRICAL STUDY

Abstract

The main objective is to find out the impact of the Tax Credit (ITC) in the GST structure on the utilitarian capacity and liquidity of micro, small and medium-sized enterprises (MSMEs) in India. Using a coordinated survey to gather information on working capital stocks and GST consistency, 200 MSMEs in Assam, India, were selected to conduct a quantitative assessment. The results show that there are significant areas for the relationship between better working capital conditions and the use of ITS. This suggests that MSMEs can have greater financial flexibility and fewer pay restrictions if they do register ITC claims. According to the practical implications of the assessment, policymakers should deal with the ITC system and offer additional assistance to ensure that MSMEs can fully benefit from the GST. This study is novel because it is uniquely relevant to the state of Assam, offering alternative, progressive views on the specific impact of the goods and services tax on small businesses in that state.

Keywords

• input tax credit
• working capital
• MSMES
• GST
• India
• Assam