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GST Reforms and the Changing Economic Contribution of MSMEs: Evidence from Khadi and Village Industries Sector

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Author Affiliations

  • 1Department of Commerce, Bagalkot University, Jamkhandi - 587301 Karnataka, India and Department of Commerce, Government First Grade College, Hukkeri - 591309 Karnataka, India
  • 2Department of Management, Government First Grade College, Hukkeri -591309, Karnataka, India

Int. Res. J. Social Sci., Volume 15, Issue (3), Pages 35-42, July,14 (2026)

Abstract

One of the significant tax reforms in the Indian economic history is implementation of GST Act 2017. The Goods and Services Tax (GST) introduced in India on July 1, 2017 which replaced a complex system of multiple indirect taxes and aimed to create a unified market under the principle of One Nation, One Tax. The Micro, Small and Medium Enterprises (MSME) sector is an instrumental aspect of the Indian economy for employment generation and innovative performance. It constitutes the back bone of the Indian economy. Khadi and Village Industries are significant part of the MSME sector. This study examines the changing economic contribution of Micro, Small and Medium Enterprises (MSMEs), with special reference to the Khadi and Village Industries (KVI) sector under the Khadi and Village Industries Commission (KVIC). The aim of this paper is to assess the impact of GST reforms on performance of Khadi and Village Industries To know whether there is an impact exists or not, the secondary data from Annual Reports of the Ministry of MSME and KVIC for the period 2012-13 to 2024-25 used, the study adopts a descriptive and analytical research design. Key indicators analysed include MSME share in GDP, production, sales, employment generation in the KVI sector, tax framework, and government budgetary support. It is found that GST reforms have significant impact on the performance of Khadi and Village industries. Although transitional compliance challenges emerged, the reforms reinforced by GST 2.0 reform facilitated formalisation, input-tax credit benefits, and improved market integration. The paper also discovers the various challenges faced by KVI.

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