Authors - Sreesankar R S, Pranav Vinod, S Kailas, Vivek V, Durgalashmi C V Abstract - The insertion of the Goods and Services Tax (GST) in 2017 was assumed not only to simplify India’s indirect tax system but also to encourage small firms to shift from the informal to the formal economy. For micro and small enterprises, enactment through GST registration can open doors to bank credit, digital payment systems and government schemes, all of which are central to financial inclusion. Kerala offers a particularly interesting setting because it combines a strong micro-enterprise culture with active financial inclusion initiatives such as self-help groups, microfinance and financial literacy programmes supported by institutions like Kerala bank and NABARD. This paper explores the influence of goods and services tax (GST) on small business formalization in Kerala, and its impact on their access to formal financial services. The study which is based on primary data collected from small enterprises that are both in and out of GST cover selected districts in Kerala also supplemented with secondary data mainly derived from official and policy sources, aims to examine what trends emerge in relation to patterns of GST adoption, perceived costs and benefits associated formalization as well as changes in bank accounts credit digital transaction access post-GST. Objective of the findings is to provide evidence on whether GST acts as a facilitator for small businesses in accessing formal finance and then identifying policy actions that could make tax reforms more enabling and supportive for grassroots entrepreneurship.
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