The Finance Commission of India stated that FY 2020-21 was full of uncertainties and the pandemic led to the creation of an uncertain economic environment of the SME sector in India. However, the implications of COVID-19 have been relatively more devastating for small and medium-sized business enterprises in India. The literature review based on the analysis of the secondary journals showed that the filing of GST returns led to a constraint of working capital faced by business owners of SMEs. Moreover, it was also inferred that the denial of credit on input taxes on GST resulted in a further deterioration of business for SMEs, which were a part of the food sector. However, results from secondary research signified that the financial situation of rural SMEs has become volatile due to job losses, weak financial quarterly income, salary cuts and lower volume of sales. A majority of 61% of business owners of SMEs in India decided to lower their respective scale of business operations during the pandemic. The feasible recommendation will be to exempt the business owners from paying penalties. Also, GST charges would be levied after the deduction of ITC charges. It can be concluded that the optimal way for managing the way entrepreneurs of SMEs manage business operations is to file GST returns in a quarterly manner, rather than per month. Besides, additional recommendations such as computing ITC and GST charges via the auto-generated system and re-setting the rate of interest subvention were proposed by the researcher.