The central government is considering steps to simplify the Goods and Services Tax (GST) system. The main aim is to reduce the compliance burden on businesses, especially small and medium enterprises.
According to experts, this move will bring major relief to Micro, Small, and Medium Enterprises (MSMEs), which are currently facing multiple challenges.
An official announcement related to these changes may be made in the Union Budget 2026. One key reason behind this plan is the recent impact of US tariffs, which have affected exports and increased pressure on small businesses.
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Several GST Reform Proposals Under Review
The government is currently reviewing multiple proposals to make GST compliance easier. One important proposal is to allow small businesses to pay GST on a quarterly basis instead of monthly payments.
At present, businesses are required to file GST returns and pay taxes every month, which can be difficult for smaller firms. As per sources quoted by Mint, this quarterly payment option would reduce paperwork and save time for MSMEs.
Under the revised MSME classification rules, businesses with an annual turnover of up to ₹10 crore are considered micro enterprises. These businesses are expected to benefit the most from the proposed changes.
Leniency for Initial Mistakes in GST Filing
Another major proposal focuses on reducing penalties for small errors. The government plans to take a more lenient approach while enforcing GST rules for MSMEs.
Under this plan, MSMEs will only receive warnings for delays or unintentional mistakes in GST return filing.
No penalties will be imposed for the first two such mistakes, according to sources familiar with the matter. Currently, penalties for delayed filings are imposed under Section 47 of the Central GST Act.
This change will help businesses that may miss deadlines due to limited staff or lack of technical support.
Penalties and Interest for Late GST Returns
Currently, delays in filing GST returns such as GSTR-1, GSTR-3B, and GSTR-9 attract daily penalties until the return is filed. In addition to penalties, businesses must also pay interest at 18% per annum on delayed tax payments.
Sources revealed that the MSME Ministry has already sent these proposals to the Finance Ministry for consideration.
It is also worth noting that the government has already taken steps to ease GST pressure by reducing GST rates earlier this year. These revised rates came into effect on September 22.
Impact of US Tariffs on MSMEs
MSMEs are also facing external challenges. US President Donald Trump has imposed a 50% tariff on Indian goods, which has negatively impacted exports.
This has increased financial stress on small businesses involved in international trade.
India has around 73 million MSMEs, which contribute nearly 30% of the country’s GDP and account for about 45% of total exports.
Due to their importance in the economy, there has been a long-standing demand to reduce GST compliance requirements for these businesses.
High Compliance Costs for Small Businesses
Vinod Kumar, President of India SME Force, highlighted the challenges faced by small enterprises. He told Mint that filing GST returns and meeting compliance requirements is time-consuming and often requires dedicated staff.
For micro enterprises with limited resources, compliance costs can go as high as 6–8% of total turnover, which significantly affects profitability.
Officials confirmed that the MSME Ministry, Finance Ministry, and Ministry of Corporate Affairs are actively discussing ways to simplify tax rules and reduce this burden.