Taxation is a powerful tool to achieve sustainable development goals (SDG) as tax policies help strengthen economic growth and improve revenue capacity. So, after tax reform, it is vital to analyze their impact on the performance of enterprises. Keeping in mind the SDG, the present study was conducted in India after the major tax overhaul—Goods and Service Tax (GST) on 1 July 2017, to measure the impact on Return on Equity (ROE) and Return on Investment (ROI) as they are the barometers to measure performance (DuPont Analysis). We opted for tax reform determinants, the characteristics of firms, demographic variables, and drivers from DuPont analysis to conduct the research, as all these variables can help identify the different causes of factors impacting ROI and ROE among different types of firms and demographics across countries. An econometric analysis of 546 registered SMEs (small and micro enterprises) was conducted using the regression model, structured equation modeling, and exploratory and confirmatory factor analysis to achieve the objectives. The empirical findings highlighted that a firm’s size, turnover, and DuPont analysis drivers (earnings × asset to sales × asset turnover) positively enhanced the ROI and ROE. Further, the change in the tax system after the tax reforms has enabled the detection of tax fraud and wrong invoices, reducing the missing insolvent traders and increasing the working capital flow of the firms, which in turn has augmented financial performance.

Taxes are imperative for the economy and businesses for better growth and development. Understanding the taxes and having the right approach towards them can make a vast difference between the success and failure of businesses. Therefore, the present paper aims to examine the impact of tax knowledge on business performance. The study is based on the primary survey of 450 registered Indian MSMEs. The empirical findings from the Partial Least Square Structure Equation Modeling highlight that tax knowledge enhanced operational efficiency and prevented firms from tax fraud. In addition, the technological advancement in the tax system and its knowledge led to proper tax administration and governance by firms which enhanced their productivity. The results may prove beneficial for policymakers, governments, and businesses because in-depth tax knowledge would lead to timely tax compliance and reduced tax evasion, avoidance, and scams.

Tax and economy go hand in hand, and whenever any overhaul in tax structure takes place, it becomes essential to evaluate its effect on its sector and concerned businesses. The present study examines the effect of Goods and Service Tax (GST) on Indian Micro, Small and Medium Enterprises (MSMEs) business performance. Data were collected through a structured questionnaire from 404 registered MSMEs. The partial least square equation modeling results emphasized an overall positive impact of GST on business performance. The path model demonstrated that determinants of GST- change in the tax system, technology transition, and tax awareness and knowledge have enhanced the performance in terms of ease of doing business, operational efficiency, and increased profitability and have reduced the working capital blockage of funds. However, in contrast, the GST compliance system has increased the compliance burden on the firms, which harmed their performance. Further, the study examined that MSMEs’ size, turnover, and form impact the performance through the GST compliance system of the enterprises. The results may benefit the policymakers and other emerging economies in focusing on the tax reform factors which enhance the performance leading to better economic growth in the future with the support of MSMEs’ better performance. JEL Code: H20; M10; O33; C30