India's gross GST collections rose to ₹1.7 trillion in November over lower tax rates - livemint.com

India's September tax cuts put the brakes on revenue growth but delivered the consumption boost as intended, government officials said.

The Centre and states together collected goods and services tax (GST) revenue of ₹1.7 trillion in November, only slightly more than ₹1.69 trillion they collected a year earlier. However, the actual sale value of goods and services was sharply higher in September-October, indicating higher consumption, the officials said on condition of anonymity.

“Overall, the taxable value of all supplies under GST grew by 15% during the two-month period of September-October, compared to the same period in 2024. Growth in the same period last year was 8.6%. This surge in taxable value demonstrates strong consumption uplift, stimulated by reduced rates and improved compliance behaviour,” the official said, citing tax return filing data.

The GST cuts that took effect on 22 September were first indicated by Prime Minister Narendra Modi in his Independence Day speech, and approved by the GST Council on 3 September. The November GST data released on Monday reflects the sales of October, the first full month of lower tax rates. The numbers illustrate the impact of GST cuts, the immediate consumption boost, and the effect of US tariffs on Indian exports.

“As GDP private consumption data will be released much later, GST taxable value serves as the most reliable real-time proxy for consumption, and the current numbers clearly indicate sustained demand expansion,” a second official said.

The November GST revenue growth of 0.7%—the year's slowest—before adjusting for tax refunds, also bears the brunt of the 25% additional tariff the US imposed on India from 27 August, on top of the 25% already in place from the beginning of that month. This was visible on the sale value of textiles, fabrics and apparel, which grew 8% in September-October period this fiscal, compared to the 12% growth in the ‘supply value’ reported in the same time a year ago, the official explained. In all other sectors, sale values grew significantly in the September-October period this year from the year-ago period.

For example, the sale value or business turnover from buses and passenger car sales grew 20% in the September-October period this year, compared to a 12% growth a year earlier. In the case of cement, class, ceramic and stone products, it was a 19% growth in the two-month period this year compared to the year-ago period. In the case of goods carriers and other vehicles, it is a 12% expansion during the period this year compared to a 2% growth a year ago.

The latest vindicates the government's strategy that cheaper essentials and mass-use items will raise demand as predicted by the Laffer Curve theory, the second official said, referring to the economic idea that moderate tax rates can boost economic activity and tax revenue. "These trends confirm that next-gen GST reforms have not disrupted revenue stability, and that consumption-side buoyancy has begun to translate into higher taxable value in key sectors,” the official added.

“It is essential to note that the gross GST collections (excluding compensation cess) have largely remained the same as the same month last year, indicating that the loss on account of rate reductions have been compensated by higher consumption, although not at the expected scale,” explained M.S. Mani, a partner at Deloitte India.

After tax refunds, GST revenue grew 1.3% annually in November to ₹1.52 trillion. In the April-November period, gross GST revenue of Centre and states grew 8.9% annually to ₹. 14.75 trillion. After refunds, a 7.3% growth was reported in this period to ₹12.79 trillion.

“While the September quarter GDP data indicates a robust growth, GST collections over the next four months would indicate whether the FY26 fiscal targets can be met as planned,” said Mani. India’s economy beat expectations in the second quarter with an 8.2% growth, prompting chief economic advisor V Anantha Nageswaran to project a 7% or more economic expansion for the full year.

Mahesh Jaising, partner & indirect tax leader at Deloitte India, said the increase in GST collections was driven by the resilience of India’s economy and the positive momentum from GST 2.0 reforms.

"The path-breaking rate rationalization has simplified compliance and improved business confidence, with pent-up demand is translating into steady consumption across sectors. On a month-on-month comparison with previous year, the revenue growth has been positive. Specifically, refunds are up 20% on a YTD basis as compared to last year November, showing the implementation of refund-related rationalization measures," said the tax expert.