Assessing the Effect of Digital Taxation on Indian Businesses: A Perspective Analysis

Abstract

This study examines the impact of digital taxation on businesses in India, focusing on the perceived benefits, compliance burdens, and challenges faced by different sectors, business sizes, and locations. The research explores how the implementation of digital taxation has affected the retail, manufacturing, and service sectors, with a particular emphasis on small and micro enterprises. Additionally, the study investigates the role of geographical location (urban, semi-urban, and rural) in shaping the experiences of businesses in digital tax compliance. Using both descriptive and inferential statistical methods, including ANOVA and crosstabulation, the study highlights significant variations in digital taxation's impact on businesses. The findings reveal that industry type does not significantly influence the perceived benefits of digital taxation, while business size plays a critical role in determining the compliance burden, with micro and small enterprises facing higher challenges than medium and large businesses. Furthermore, location-based disparities are evident, with rural and semi-urban businesses experiencing greater challenges, such as high implementation costs, limited digital infrastructure, and resistance to compliance. The study identifies key barriers, including limited access to digital tools and weak government enforcement, which hinder the effective implementation of digital taxation. The paper concludes with policy recommendations to enhance tax compliance and reduce the administrative burden on smaller enterprises, particularly in rural and semi-urban areas.