India's central and state governments collected a total of ?1.86 trillion as goods and services tax (GST) in August, 6.5% more than a year ago, recording its second slowest pace so far this fiscal year, official data showed. The collections were hit by US tariff-related uncertainties and softer demand during the rainy season.
After refunds, the GST revenue came to ?1.67 trillion, 10.7% more than the net revenue a year ago. Businesses received ?19,359 crore as tax refunds in August, which is nearly 20% lower than the refunds given in the same time a year ago, the data showed.
In the preceding months, tax refunds have been high. For example, in July, GST refunds had jumped 67% from the year ago period.
In August, the central government collected ?31,474 crore as Central GST, while states collected ?39,736 crore as States GST. Taxes on inter-state sales and imports apportioned among central government and the consuming state were at ?83,964 crore, while the revenue from GST compensation cess was ?11,792 crore.
Despite the moderation in the pace of GST collections in August—which reflects sales made in July—the monthly average revenue collection so far this year was ?2 trillion, implying GST collections so far have been on a strong footing.
Central and state governments are now considering a revamp of the GST structure to simplify the tax system, give tax relief to consumers and make compliance easier. Federal indirect tax body, the GST Council, is scheduled to meet later this week to consider proposals in this regard.
Growth signal
The continued rise in gross domestic GST collections is a strong indicator of India’s economic resilience but the significant dip in export refunds is a clear signal of the impact global tariffs are having on our export sector, said Saurabh Agarwal, Tax Partner, EY.
A swift and decisive implementation of the proposed rate rationalization is critical, he added. “A delay could foster a 'wait-and-watch' mindset among consumers, potentially leading to a temporary dip in collections. A timely policy action will be vital to sustaining our current momentum,” Agarwal added.
After a 1.7% net GST revenue growth in July, a double-digit growth in August, despite geopolitical headwinds, is encouraging, said Pratik Jain, a partner at Price Waterhouse & Co LLP. “With expected GST cuts on many products later this month, the government would be closely monitoring the collections over the next few months,” said Jain.
Experts also pointed out that the moderation in the pace of growth compared to the previous years shows GST revenues are stabilising on a high base. “The trend highlights a maturing tax system and points to the continued expansion of India’s economy, supported by services, manufacturing, and the early signs of festivedemand,” said Sandeep Sehgal, partner-tax at AKM Global, a tax and consulting firm.
After four months of rising GST refunds, August shows a decline sequentially; although on an annual basis, the refunds are 18% more than last year, explained, M.S. Mani, partner, Deloitte India.
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