Tax Efficiency and Compliance Strategies for Small Businesses in a Changing Regulatory Environment: Evidence from India

Parul Choudhary, Dr. Rinku S. Goel

Authors

Parul Choudhary, Dr. Rinku S. Goel

Keywords:

Tax Efficiency, Tax Compliance, Small Businesses, GST, Regulatory Change, India

Abstract

Small firms are greatly responsible for India’s economic growth since they not only create a lot of jobs but also increase industrial output and enhance the development of different regions. However, small businesses still struggle a lot. So, achieving tax efficiency and compliance is still a long way to go for the enterprises because of the ever-changing regulations, the complexity of tax structures, and the increasing costs of compliances. The tax reforms done in India recently e.g., the goods and services tax (GST) and the fast-tracked digitization of the tax administration are good examples of the attempts made to both simplify the whole taxation system and make it more transparent. However, the net impact of these measures on small businesses is still difficult to tell.

This research delves into the intricate relationship between tax efficiency, tax compliance, and business performance for small companies in India that are influenced by various regulations. Using a descriptive and analytical approach, the study gathers primary data through structured questionnaires distributed to small business owners and managers, alongside secondary data sourced from government reports, policy documents, and academic literature. To assess the proposed hypotheses, it employs statistical techniques like descriptive statistics, correlation analysis, and regression models.

The findings reveal that key factors influencing tax compliance behavior include tax knowledge, perceived regulatory complexities, compliance costs, and access to digital infrastructure. While the Goods and Services Tax (GST) has introduced greater transparency and formalization, it has also increased compliance costs, disproportionately affecting small enterprises due to technological barriers. Furthermore, the study highlights a positive link between tax efficiency strategies and business performance, indicating that effective tax planning can minimize asset lock-up and bolster operational stability. Finally, the paper recommends policy measures aimed at simplifying tax procedures, enhancing taxpayer education, and promoting technology-driven compliance support for small businesses.

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