Studying the Impact of GST Adoption on Performance of Small-Scale Businesses in India: An Empirical Analysis Using Partial Least Squares Structural Equation Modeling

Abstract

One of the most important aspects of India's tax system is the Goods and Services Tax (GST), which is a comprehensive tax on goods and services that has the potential to revolutionize tax procedures and promote economic growth. This study investigates the impact of Goods and Services Tax (GST) adoption on the performance of small-scale businesses in India, utilizing the Innovation Diffusion Theory (IDT) and incorporating employee trust as a moderating variable. Employing Partial Least Squares Structural Equation Modeling (PLS-SEM), the analysis draws on 330 valid responses from an initial 500 surveyed participants. The structural model results indicate that relative advantage (β = 0.392, p < 0.000), complexity (β = 0.332, p < 0.000), and compatibility (β = 0.170, p < 0.002) significantly influence GST adoption (GA), whereas observability (β = 0.093, p < 0.096) does not. Furthermore, GST adoption positively impacts financial performance (FP) (β = 0.290, p < 0.000), and employee trust (ET) significantly moderates this relationship (β = 0.461, p < 0.000). This research provides valuable insights into the dynamics of GST adoption, emphasizing the critical role of employee trust in enhancing organizational performance. Policymakers and business leaders can leverage these findings to foster a supportive environment for GST implementation, ultimately driving business growth and compliance in the small-scale sector.