Strong GST Collections Challenge Revenue Loss Predictions

Recent reports indicate a robust performance in India’s Goods and Services Tax (GST) collections, countering fears of significant revenue losses following recent tax reforms. According to research from the State Bank of India (SBI), the Gross GST collections for October 25—reflecting returns from September—rose by 4.6 percent to reach Rs 1.96 lakh crore. This increase defies predictions of a downturn, as apprehensions surrounding the impact of GST rationalisation have proven unfounded.

The report highlights that while the overall gross domestic collection increased by 2 percent year-on-year, the revenue generated from imports surged by 12.8 percent. The month of September also marked a record in e-way bill generation, with 13.2 crore bills issued. Furthermore, refunds processed in October reached Rs 26,934 crore, reflecting a substantial 39.6 percent year-on-year growth.

Positive Projections for Future GST Revenue

In light of these figures, Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, expressed optimism about the future of GST revenue. “Assuming that states experience similar gains post-rationalisation as observed in October, we project GST revenue for FY26 to indicate that most states will see positive gains throughout the fiscal year,” Dr. Ghosh stated. This suggests that overall, states should remain as net gainers following GST rationalisation.

The Indian government’s estimate of revenue foregone due to GST rate adjustments stands at Rs 48,000 crore. Some analysts, however, had anticipated losses as high as Rs 10 lakh crore, reflecting a level of concern that now appears exaggerated.

Previous adjustments to GST rates, specifically those made in July 2018 and October 2019, provide historical context. Past evidence suggests that while initial revenue fluctuations may occur, the long-term trend points towards recovery and enhanced collections following rationalisation.

As the government navigates this transition, the latest data from SBI reinforces the notion that fears surrounding significant revenue declines may not materialise. With GST collections exhibiting strong growth, the potential for a financial rebound in state revenues appears increasingly likely.

In summary, the current GST collection trends not only challenge earlier assumptions about revenue loss but also highlight a more resilient economic environment post-rationalisation.