The GST, implemented in India in 2017, marked a transformative overhaul of the indirect tax system with significant implications for SMEs. This paper examines GST’s impact on Indian SMEs through a structured analysis of its outcomes, challenges, and the road ahead. The study is based on recent data and authoritative sources up to 2025. Key findings indicate that GST has broadened the tax base and formalized a large segment of SMEs, facilitating increased MSME registrations and improved access to credit. It has unified the national market by replacing multiple taxes with “one nation, one tax,” leading to efficiency gains such as reduced logistics costs and a more transparent business environment. However, the transition has also imposed compliance and operational challenges on SMEs. Many small businesses face higher compliance costs, working capital constraints, and adaptation difficulties under GST’s digital and procedural requirements. The paper identifies these challenges in detail and proposes strategic recommendations to enhance GST compliance and promote SME growth. Recommendations include simplifying GST procedures (e.g. easing input credit rules and return filings for small taxpayers), strengthening support systems and training for SME compliance, refining the composition scheme, and addressing structural issues like inverted duty structures. The conclusion emphasizes that while GST has been beneficial in formalizing and integrating SMEs into the economy, continued reforms and supportive measures are crucial to ensure that India’s SME sector not only complies with GST but also thrives in the post-GST era.