The government is considering simplifying Goods and Services Tax (GST) rules to reduce the compliance burden on businesses.
This move is expected to provide relief, especially to small enterprises. An official announcement regarding these changes may be made in the Union Budget 2026.
Experts believe that recent US tariffs have negatively affected micro, small, and medium enterprises (MSMEs). Reducing GST-related compliance requirements could help ease their financial and operational stress.
Proposals Under Consideration for MSMEs
The government is currently reviewing several proposals to make GST compliance easier. One key proposal is to allow small businesses to pay GST on a quarterly basis instead of every month. At present, GST payments are required monthly.
Under the revised MSME classification rules, businesses with an annual turnover of up to ₹10 crore are categorized as micro enterprises.
Warning System Instead of Immediate Penalties
The government also plans to adopt a more lenient approach while implementing GST rules. According to this plan, MSMEs will only receive warnings for delays or unintentional mistakes in filing GST returns.
No penalties will be charged for the first two such instances. This proposal relates to Section 47 of the Central GST Act, which currently allows penalties for delayed return filing.
Current Penalty Rules for Late GST Filing
At present, delays in filing GST returns such as GSTR-1, GSTR-3B, and GSTR-9 attract daily penalties until the returns are filed. Additionally, interest at the rate of 18% per year is charged on delayed tax payments.
Sources said that the MSME Ministry has sent these proposals to the Finance Ministry. This year, the government has already reduced GST rates, and the new rates came into effect on September 22.
Impact of US Tariffs on MSMEs
US President Donald Trump has imposed a 50% tariff on Indian goods. This has affected Indian exports and MSMEs. India has around 73 million MSMEs, which contribute nearly 30% to the country’s GDP and account for about 45% of total exports.
Due to these challenges, there has been a long-standing demand to reduce the GST compliance burden on small businesses.
High Cost of GST Compliance
Vinod Kumar, President of India SME Force, told Mint that GST return filing and related compliance processes are time-consuming and require dedicated staff.
He added that for micro enterprises with limited resources, compliance costs can be as high as 6–8% of their total turnover.
Officials also said that the MSME Ministry, Finance Ministry, and Corporate Affairs Ministry are jointly discussing ways to simplify tax rules.
