The Union government is considering measures to ease the goods and services tax (GST) compliance burden for small businesses in the upcoming Budget, amid concerns that higher US tariffs have disproportionately
impacted micro and small enterprises, Mint reported, citing people familiar with the discussions.
One proposal under review is to allow micro enterprises to pay GST quarterly instead of monthly, the sources told Mint. Under the revised MSME norms, micro enterprises are defined as businesses with annual turnover of up to Rs 10 crore.
The Centre is also looking at adopting a more lenient enforcement framework. In cases involving genuine errors or delayed filings, MSMEs may initially be issued a warning, with penalties waived for the first two instances, one of the people cited by Mint said.
Currently, Section 47 of the Central GST Act levies late fees for delays in filing returns such as GSTR-1, GSTR-3B and GSTR-9, with penalties accruing on a daily basis until a specified cap is reached. Delayed tax payments also attract interest at 18 percent per annum, Mint noted.
These proposals were put forward by the MSME ministry to the finance ministry following GST rate cuts announced in September. The timing is critical as US tariffs of up to 50 percent have added to the challenges faced by smaller exporters, according to Mint. India has around 73 million MSMEs, which contribute nearly 30 percent to GDP and account for about 45 percent of total exports.
Queries sent to the finance and MSME ministries did not receive a response until press time, Mint reported.
Industry representatives have long maintained that compliance costs weigh more heavily on very small firms. “Tax filings and related compliances consume a lot of time and often require dedicated manpower,” Vinod Kumar, president of the India SME Forum, told Mint. For micro enterprises with limited resources, compliance expenses can account for 6–8 percent of turnover, he added.
Although the GST regime includes a composition scheme designed to simplify compliance, adoption has remained limited because businesses opting for it are not eligible to claim input tax credit, experts told Mint.
Officials said the MSME, finance and corporate affairs ministries have been holding consultations on simplifying taxation and regulatory requirements. However, given that recent GST rate rationalisation has already affected revenue buoyancy, any compliance relaxations will be assessed through a cost-benefit lens to minimise the impact on collections, the people cited by Mint said. Any GST-related changes would also require approval from the GST Council before being incorporated into the Finance Bill.
Tax expert Ved Jain, founder of Ved Jain & Associates, told Mint that quarterly tax payments or similar measures are unlikely to significantly dent government revenues. Another official added that the GST rate reforms announced in September need to be complemented by steps that reduce the compliance burden on smaller firms.
GST collections stood at Rs 1.7 trillion in November, marginally higher than Rs 1.69 trillion collected in the same month last year, Mint reported. Gross GST revenue for the first eight months of FY26 (April–November 2025) rose about 9 percent year-on-year to Rs 14.75 trillion.
The Budget may also propose the creation of a single-window mobile application for MSMEs that integrates GST, income tax and UDYAM filings, one of the people cited by Mint said. UDYAM is the government’s portal for MSME registration.
In addition, the government is considering offering micro enterprises free embedded accounting software to simplify bookkeeping and digital payments as part of the Digital India initiative, Mint reported.
Other ideas under discussion include moving micro enterprises to a self-certification audit model and speeding up the GST registration process, with suspended registrations potentially being restored within 48 hours of compliance. Industry bodies have flagged delays in reactivating GST numbers for temporarily inactive taxpayers, Mint noted.
Experts say the recent revision in MSME definitions makes such steps necessary. The turnover threshold for micro enterprises has been raised from Rs 5 crore to Rs 10 crore. “With higher thresholds, corresponding relaxations are needed,” Jain told Mint, adding that smaller firms require greater flexibility in taxation.
