Refund Woes, Audit Fears: Why GST Still Isn’t Easy for MSMEs

India’s Micro, Small and Medium Enterprises (MSMEs) continue to grapple with operational and compliance hurdles under the Goods and Services Tax (GST) regime, according to new survey insights. Despite ongoing improvements to the GST portal, persistent pain points remain—particularly around automation, integration, and refund mechanisms, according to a Deloitte report. 

Recent data shows that 61 per cent of MSMEs in the south Asian nation are keen on automating interest computation, underscoring the need for streamlined compliance processes. In contrast, larger enterprises (60–62 per cent) have turned their focus toward integrating tax-type payments into the GST framework, reflecting different priorities between business scales, it mentioned. 

One of the major obstacles MSMEs face is the integration of Invoice Matching System (IMS) actions with accounts payable and receivable systems. Over half (54 per cent) of MSMEs cite operational barriers and limited technological resources as ongoing challenges in this area, it further said. 

GST Compliance Woes For MSME's In India

The Invoice Matching System itself poses multiple issues, including the absence of real-time alerts, integration difficulties, and ambiguity around compliance timelines—creating uncertainty and audit-related anxiety for small businesses, according to the latest Deloitte survey report. 

On a more positive note, quarterly return filings have gained momentum, emerging as the top-rated MSME-friendly GST provision after climbing from fourth place in previous rankings. This suggests increasing recognition of policy shifts that are aimed at easing the compliance burdens for business ventures that fall under this specific category.

Sector-specific GST benefits vary widely. Meanwhile, the consumer-focused businesses emphasize relaxed thresholds under the composition scheme, whereas banks and financial institutions favor higher limits for mandatory GST registration.

Meanwhile, interest in invoice financing has waned, dropping from the much-preferred GST support mechanism last year to the fourth position. This shift likely indicates MSMEs’ growing concern which revolces around immediate compliance and liquidity support rather than long-term financing tools.

As India’s GST ecosystem evolves, addressing these operational friction points will be key to enabling true ease of doing business for MSMEs.