ESC
Clarivate

 
Source: Journal Citation ReportsTM from ClarivateTM 2022

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2022) 1.7
Journal Citation IndicatorTM (2022) 0.42
Received: 2020-02-17  |  Accepted: 2020-05-25  |  Published: 2020-06-30

Title

Goods and services tax shock on small and medium enterprises working capital in India


Abstract

Goods and Services Tax (GST) reform introduced by the Indian government in 2017 was considered as the utmost radical and comprehensive indirect tax regime undertaken since independence. The new tax reform had creataed a shock wave among the Indian business houses, especially to the Small and Medium Enterprises short term working capital requirements. This research paper analyzes the working capital constraints created by the implementation of GST on the SMEs. Three research models have been developed by including the major working capital components namely average collection period, average payables period, inventory conversion period and a dummy variable to capture the effect of GST. The mathematical model presented in the paper has been tested using Random effects GLS method. The results of the study reveals that during the sample period the SMEs production capacity had deteriorated, collections and payments were delayed, profit margins were diminished and the credit requirements had escalated. This research outcome will provide an insight to the policymakers and financial institutions in India to implement and revamp strategies that will enable the SMEs to revive from this challenging environment successfully.


Keywords

SME, working capital management, goods and services tax


JEL classifications

G30 , G32


URI

http://jssidoi.org/jesi/article/598


DOI


Pages

3464-3476


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Kumaraswamy, Sumathi
University of Bahrain, Isa Town, Bahrain http://www.uob.edu.bh
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

7


Number

4


Issue date

June 2020


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

HTML views: 3008  |  PDF downloads: 1420

References


Agrwal, A., Sekhani, R. and Mohan, D. (2017) Short-Term Impact of GST on Small & Medium Businesses across India: Reflections from Case of Local Markets in Uttarakhand and Kerala. Research Report. Haryana, Centre for New Economic Studies. http://jsia.edu.in/wp-content/uploads/2019/03/gst_study.pdf

Search via ReFindit


Arellano, M. 1987. Computing robust standard errors for within-groups estimators. Oxford Bulletin of Economics and Statistics, 49, pp. 431–434. Quoted in: Hoechle, D. (2007) Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 7(3), 281–312. https://doi.org/10.1177/1536867X0700700301

Search via ReFindit


Baltagi, B.H. (2005) Econometric Analysis of Panel Data. 3rd edition. England. John Wiley & Sons Ltd. https://himayatullah.weebly.com/uploads/5/3/4/0/53400977/baltagi-econometric-analysis-of-panel-data_himmy.pdf

Search via ReFindit


Banerjee, S., and Prasad, S. (2017) Small businesses in the GST regime. Economic and Political Weekly, 52(38), pp.18-22. https://www.epw.in/journal/2017/38/commentary/small-businesses-gst-regime.html

Search via ReFindit


Central Bank of Bafrain https://www.cbb.gov.bh

Search via ReFindit


Drukker, D.M. (2003) Testing for serial correlation in linear panel-data models. The Stata Journal, 3(2), pp. 168–177. https://journals.sagepub.com/doi/pdf/10.1177/1536867X0300300206

Search via ReFindit


Froot, K. A. (1989) Consistent covariance matrix estimation with cross-sectional dependence and heteroskedasticity in financial data. Journal of Financial and Quantitative Analysis, 24, pp. 333–355. Quoted in: Hoechle, D. (2007) Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 7(3), pp. 281–312. https://doi.org/10.1177/1536867X0700700301

Search via ReFindit


Goods and Services Tax Council http://www.gstcouncil.gov.in

Search via ReFindit


Huber, P. J. (1967) The behavior of maximum likelihood estimates under nonstandard conditions. In Proceedings of the Fifth Berkeley Symposium on Mathematical Statistics and Probability, 1, pp. 221–233. Berkeley, CA: University of California Press. Quoted in: Hoechle, D. (2007) Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 7(3), pp. 281–312. https://doi.org/10.1177/1536867X0700700301

Search via ReFindit


James Sunday, K. (2011). Effective Working Capital Management in Small and Medium Scale Enterprises (SMEs). International Journal of Business and Management, 6(9), 271-279. https://doi.org/10.5539/ijbm.v6n9p271

Search via ReFindit


Kawle, P. S., and Aher, Y.L. (2017) GST: An economic overview: Challenges and Impact ahead. International Research Journal of Engineering and Technology, 4(4), pp. 2760-2763. https://www.irjet.net/archives/V4/i4/IRJET-V4I4674.pdf

Search via ReFindit


Kumar, K.S.V and Babu, K.B. (2018) A Study on Perception of Pharmacists towards Goods and Services Tax (Gst) in Guntur District of Andhra Pradesh, India. Journal of Advanced Research in Dynamical and Control Systems. 10(8) pp. 368-373. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3226153

Search via ReFindit


Madan, A., Arora, R., Roy, N.R. (2018). Sentiment Analysis of Indians on GST. In: Panda, B., Sharma, S., Roy, N. (eds) Data Science and Analytics. REDSET 2017. Communications in Computer and Information Science, vol 799. Springer, Singapore. https://doi.org/10.1007/978-981-10-8527-7_47

Search via ReFindit


Mbroh, K.J. and Attom, B.E. (2012). Accounting and control systems practices by small and micro enterprises Owners within the Cape coast Metropolitan Area of Ghana, Asian Journal of Buisness and management science, 1(9), pp. 28-47. http://www.ajbms.org/articlepdf/ajbms20129i1812.pdf

Search via ReFindit


Ministry of Micro, Small and Medium Enterprises https://msme.gov.in

Search via ReFindit


Murugesan, R., and Manohar, V. (2018) Entrepreneurship &Financial Literacy: A Roadmap to Economic Development of India. SHANLAX International Journal of Commerce, 6(1), pp. 45-51. https://zenodo.org/record/1438186#.XkhGeCgzbIU

Search via ReFindit


Pan, Y, and Jackson, R. T. (2008) Ethnic difference in the relationship between acute inflammation and serum ferritin in US adult males. Epidemiology and Infection, 136, pp. 421-431. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2870810/

Search via ReFindit


Pandey, A., and Banwet, D.K. (2018) Innovations in Indian Financial System: Remedy for Economic Growth? Technology Analysis & Strategic Management, 30(11), pp. 1283-1295. https://www.tandfonline.com/doi/abs/10.1080/09537325.2018.1487552?journalCode=ctas20

Search via ReFindit


Rao, N and Babu, K. B. (2018) A Study on Perception of Engineering Faculty towards Goods and Services Tax (Gst) in Guntur, Andhra Pradesh, India. Journal of Advanced Research in Dynamical and Control Systems, 10(3), pp. 500-508. https://islidedocs.com/document/a-study-on-perception-of-engineering-faculty-towards-goods-and-services-tax-gst-in-guntur-andhra-pradesh-india

Search via ReFindit


Rengamani, J. (2018) Impact of Goods and Services Tax (GST) on the Shipping Companies in Chennai Sector. International Journal of Mechanical Engineering and Technology, 9(8), pp. 827-835. http://www.iaeme.com/MasterAdmin/UploadFolder/IJMET_09_08_089/IJMET_09_08_089.pdf

Search via ReFindit


Rogers, W. H. 1993. sg17: Regression standard errors in clustered samples. Stata Technical Bulletin, 13, pp. 19-23. Reprinted in Stata Technical Bulletin Reprints, 3, pp. 88–94. College Station, TX: Stata Press. Quoted in: Hoechle, D. (2007) Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 7(3), pp. 281-312. https://doi.org/10.1177/1536867X0700700301

Search via ReFindit


Shukla, S., Singh, R. and Das, B. B. (2018) GST in India: Performance of companies after one - year of roll out. Indian Journal of Finance, 12(11), 37-48. http://www.indianjournaloffinance.co.in/index.php/IJF/article/view/138197/0

Search via ReFindit


Srivastava, S and Bisaria, C. (2018) The Metamorphosis of the Real Estate Sector in India After the Implementation of GST and RERA. Revista Espacios, 39(33), pp.21-34. http://www.revistaespacios.com/a18v39n33/a18v39n33p21.pdf

Search via ReFindit


White, H. (1980) A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48, pp. 817–838. Quoted in: Hoechle, D. (2007) Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 7(3), pp. 281-312. https://doi.org/10.1177/1536867X0700700301

Search via ReFindit