The growth in Goods and Services Tax (GST) collections moderated in November 2024, following a significant overhaul of the tax structure that included rate reductions on a wide range of items. The government, however, has asserted that the move is aimed at boosting consumption and that the revenue trends align with its estimates.
November Collections Reflect Rate Cut Impact
Based on transactions from October, the total GST collection for November (excluding compensation cess) saw a modest increase of 0.7% to reach Rs 1.7 lakh crore. A breakdown reveals a contrasting picture: revenue from domestic transactions actually declined by 2.3% to Rs 1,24,300 crore, while collections from imports surged by 10% to nearly Rs 46,000 crore.
On a net basis, after accounting for refunds, the collections grew by 1.3% to Rs 1,52,079 crore. Government officials highlighted that refunds were 10% lower compared to the previous period and clarified that these were not being deliberately held back.
Government's Rationale and Economic Optimism
The rate rationalisation exercise, which came into effect from September 22, was anticipated to have a short-term fiscal impact. A senior official explained that the primary intent was to increase disposable income in the hands of consumers. "The challenge was to ensure that it is sustainable. The numbers give us optimism," the official stated.
Officials pointed to data from filed returns, indicating that the taxable value of goods and services (turnover) increased during September and October. This rise is seen as a direct sign of heightened domestic consumption, which is expected to compensate for the initial revenue dip over the coming months. "The response that the economy has given... gives us confidence that the GST reform can be sustained in the short term to give a much bigger multiplier effect in the medium term," the official added.
Expert Analysis and Future Outlook
Tax experts concur with the government's assessment, noting that the muted growth was expected. Pratik Jain, Partner at Price Waterhouse & Co, said, "GST collection for Nov is only marginally higher than last year. It was expected as this reflects a full month’s impact of GST 2.0 rate cuts." He expressed confidence that with a steady increase in demand, collections should improve progressively in the next few months.
M S Mani, Partner at Deloitte India, offered a measured perspective. He noted that gross collections have largely remained flat compared to the same month last year, suggesting that the revenue loss from rate cuts has been partially offset by higher consumption, though not at the anticipated scale. "While the GDP data indicates a robust growth, the GST collections over the next four months would indicate whether the FY26 fiscal targets can be met as planned," Mani concluded.
The coming months will be crucial in determining whether the bet on stimulating consumption through lower tax rates successfully translates into sustained revenue growth for the government.
