Karnataka's Goods and Services Tax (GST) revenue growth witnessed a significant moderation in October, cooling down to 3% after a robust 10% year-on-year surge in September that had positioned the state at the top nationally. The latest figures highlight a post-festival season normalization in economic activity.
From Festival High to Normalized Flow
According to data from the state commercial taxes department, Rs 7,099 crore was collected in October 2023. This marks a decline from the Rs 7,391 crore mopped up in September and is slightly higher than the Rs 6,653 crore collected in August. The September surge had placed Karnataka ahead of other economically progressive states in terms of GST growth.
Analysts and industry leaders directly link the October slowdown to the conclusion of the major festival season. Kumar Rajagopalan, CEO of the Retailers Association of India (RAI), explained the trend. "There was euphoria during the festival season in September because of the GST rate cut and we witnessed 11% growth in sales compared to the monthly average of 7%," he said. "But now it appears we are back to normal. We will know the actual position soon as final data for October is being collated."
The Rationalisation Effect and Revenue Concerns
The exceptional spike in September collections followed Prime Minister Narendra Modi's August announcement to rationalise the complex GST structure. The reform merged the multiple tax slabs of 5%, 12%, 18%, and 28% into two primary slabs—5% and 18%. Its implementation from September 22, strategically timed with the onset of Navaratri, led consumers to postpone purchases, resulting in a sharp spending spike during Dasara and Diwali.
However, this consumer benefit has raised fiscal concerns for the state government. Basavaraj Rayareddi, economic adviser to Chief Minister Siddaramaiah, acknowledged the dual impact. "We welcome the GST rate rationalisation as it resulted in reduced prices and people benefited from it. But, the reality is that the state government's revenues would take a hit and the latest GST collection figures are evidence of this," he stated.
The government had initially projected a potential revenue shortfall of Rs 15,000 crore due to the rate cuts. BT Manohar, a member of the Karnataka state GST advisory committee, termed the September surge "a mere flash" and expects the current moderated trend to continue for the remainder of the fiscal year.
Racing Towards the Annual Target
Despite the October slowdown, the state's commercial taxes department is pushing forward with stricter enforcement to meet annual goals. For the fiscal year 2025-26, Chief Minister Siddaramaiah has set a GST collection target of Rs 92,132 crore. The department has collected Rs 53,522 crore so far, leaving a significant portion to be achieved in the remaining quarter.
In a recent review, CM Siddaramaiah, who also holds the finance portfolio, directed officials from the commercial taxes and excise departments to ramp up revenue collection efforts, as both are currently lagging behind their targets for the current fiscal. The overarching target for commercial taxes—which includes GST, sales tax on fuel, and professional taxes—is Rs 1.2 lakh crore, of which Rs 72,131 crore has been collected.
Officials remain committed to bridging the gap through stricter enforcement measures designed to curb tax evasion and improve compliance in the coming months.
