India’s Goods and Services Tax (GST) revenue has reached approximately ₹1.96 lakh crore in October, marking a significant 4.6% rise compared to the previous year. This figure represents the fifth-highest monthly collection since the GST system was implemented in 2017. However, the growth was somewhat tempered by consumers postponing purchases in September, ahead of substantial rate reductions that took effect on September 22nd.
October’s collections primarily reflect economic activity from September. The government’s ‘GST 2.0’ strategy is seen as a key driver of this modest growth. Future collections, particularly in November, are expected to showcase the impact of post-rate cut festive season spending, which ministers report has surged.
Domestically, revenue growth was a modest 2%, increasing from ₹1.42 lakh crore to ₹1.45 lakh crore year-on-year. In contrast, tax revenue from imports saw a substantial jump of 12.84%, contributing ₹50,884 crore and bringing the cumulative gross GST collections to ₹1,95,936 crore.
These figures follow the GST Council’s decision on September 3rd to reduce tax rates on 375 items, ranging from household essentials to automobiles. This move was estimated to have a revenue impact of around ₹48,000 crore based on the previous fiscal year’s consumption patterns.
After accounting for refunds, net GST collections showed a 0.6% increase, totaling ₹1,69,002 crore. This growth was partly due to a significant rise in refunds, which amounted to approximately 40%, thereby releasing working capital for businesses, especially exporters.
Tax experts like Saurabh Agarwal from EY India highlighted the government’s efforts to resolve working capital issues for exporters and address inverted duty structure concerns. He noted that tax certainty and reduced capital leakages are crucial for boosting investor confidence and improving the ease of doing business.
Experts anticipate that the subdued collections in October, attributed to the rate rationalization and deferred consumer spending, will be offset by stronger figures in the following months, driven by seasonal demand. MS Mani from Deloitte India echoed this sentiment, explaining the 4.6% growth was impacted by postponed purchases but indicated robust underlying consumption.
In a significant policy shift, the GST Council unanimously decided to eliminate two of the four tax slabs (12% and 28%), retaining 5% and 18% rates. A special 40% levy is now in place for ultra-luxury and sin goods.
Looking ahead, Finance Minister Nirmala Sitharaman noted last month that consumption has risen by 10% since the rate cuts, injecting ₹20 lakh crore into consumer spending and fostering a positive cycle of economic growth.