DEEP-DIVE: GST collections rise 4.6% in Oct; experts see robust consumption but warn of emerging risks - CNBC TV18

India’s Goods and Services Tax (GST) collections for October 2025—a reflection of business activity in September—grew 4.6% year-on-year to ₹1.96 lakh crore, indicating resilience in consumption despite extensive GST rate rationalisation during the month. While the uptick aligns with government expectations, industry experts believe the upcoming months will offer a clearer picture of revenue buoyancy under the new lower-rate regime.

The Finance Ministry highlighted that the rate cuts effective from September 22, along with the abolition of compensation cess on key categories like automobiles and carbonated beverages, have had an immediate bearing on revenues. September also saw the postponement of supplies in anticipation of lower rates, muting collections for the period.

Consumption demand stays strong despite reduced rates

MS Mani, Indirect Tax Partner at Deloitte India, said the “marginal growth of 4.6% in the gross GST collections is on account of postponement of supplies from 1st to 21st September for many products whose rates were reduced and the impact of the lower rates from 22nd September, accompanied by the abolition of the compensation cess, specially on automobiles."

He added that the fact that collections grew despite “significantly reduced rates indicates that consumption remains robust, as brought out by other economic indicators as well." However, Mani cautioned that with “several states recording negative or very marginal growth,” a deep dive into sectoral GST trends is essential to shape policies enabling uniform revenue growth across states.

Festive momentum and compliance push fuel optimism

Mahesh Jaising, Partner & Indirect Tax Leader, Deloitte India, termed the surge part of the "GST utsav dhamaka" following rationalisation. He said the ₹1.96 lakh crore revenue “underscores the resilience of our economy amid festive momentum & enhanced compliance."

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This fiscal strength, he added, “arms the Government with the bold resolve to drive GST 2.0 reforms—streamlining rates, curbing evasion and simplifying compliance—propelling India toward a truly seamless, tech-driven tax ecosystem.”

Refund pressures ahead due to inverted duty structure

According to Vivek Jalan, Partner at Tax Connect Advisory Services, October marks the first full month after GST 2.0 rate cuts and includes the impact of festive spending. He said the 0.6% growth in collections "re-affirms that the boost in consumption has, to an extent, balanced the de-growth in revenue due to the rate cuts,” while pent-up demand post August announcements helped.

But Jalan flagged fresh challenges: “GST 2.0 has also created or deepened an inverted duty structure in many sectors like packaging, farming, pharma.” Taxpayers in these sectors are expected to file large refund claims from November, and as 90% of refunds must be issued within seven days, domestic refunds are set to rise sharply in November–December.

He also pointed to the withdrawal of most compensation cess, which was budgeted at ₹1.7 lakh crore for FY26. Against a CGST revenue target of ₹10.1 lakh crore, collections till October stood at ₹5.36 lakh crore—just 54% of the target, suggesting that meeting the fiscal year goal “may be compromised a bit."

Domestic Collections Flat — November Becomes Key Month

Karthik Mani, Partner — Indirect Tax, BDO India, said domestic revenues remained subdued: "Domestic transactions have remained flat, with just 2% growth year-on-year… Some discretionary purchases were postponed, awaiting lower rates."

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He said November will provide the real signal on post-rationalisation demand: "Collections for November are likely to be higher… The impact of the rate reduction should be offset by the higher volume of supplies."

Compliance Discipline and Industrial Demand Strengthening Data

Manoj Mishra, Partner & Tax Controversy Management Leader, Grant Thornton Bharat, said the October numbers validate India’s recovery momentum: "Resilient and expanding domestic economy… buoyancy despite significant rate-rationalisation underscores that reforms are stimulating consumption."

He pointed to two leading indicators:

Domestic refund disbursements surged 40% YoY — smoother credit flow

Import-linked IGST up 13% YoY — industrial demand firming up

Top States Holding Up But Uneven Growth Ahead

Sivakumar Ramjee, Executive Director — Indirect Tax, Nangia Andersen LLP, said India’s largest industrial and services hubs continue to anchor collections: "Maharashtra remains the largest contributor… Gujarat resilient despite lower tax slabs… Karnataka and Tamil Nadu are benefiting from tech and industrial revival."

But he warned the lagged impact of rate cuts will challenge less formalised economies: "Weaker states may face headwinds when the lagged effects arrive."

Policy certainty boosts investor confidence

Emphasising structural reforms underway, Saurabh Agarwal, Tax Partner, EY India, said, Despite muted September momentum due to deferment of spending, "This anticipated lag is likely to be compensated by more robust numbers in the next month, driven by seasonal buoyancy."

He lauded the Centre’s focus on addressing working capital pressures for exporters and businesses impacted by inverted duties. "This certainty in the tax regime and reduction of working capital leakages are vital confidence boosters for the investor community, reinforcing the ease of doing business."

Agarwal also noted the strong percentage growth in states and UTs such as Arunachal Pradesh, Nagaland, Lakshadweep and Ladakh, calling it “a tangible indicator of holistic economic development and deepening formalisation across India.”

Demand-led growth expected to reflect more clearly next month

Pratik Jain, Partner, Price Waterhouse & Co LLP, said that despite “massive rate cuts effective from September 22, a slight increase in domestic GST collection is encouraging and shows that demand is steadily increasing."

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He added that “consistent increase in GST refunds (domestic as well as exports) shows confidence of tax administration that GST collections would show a positive trend in future as well.” The full impact of the rate cuts will reflect in next month’s data, which “would be keenly awaited.”

Outlook

While October numbers reaffirm post-reform resilience, experts are aligned that:

Festive demand and lower rates are fueling consumption

State-level disparities require a targeted policy response

Expected surge in refund outflow may soften net revenues

Compliance-driven structural reform remains strong

As India transitions deeper into GST 2.0, November and December will serve as the real test of the sustainability of collections amid rate rationalisation and shifting duty structures.