Post rate cut, GST collection dips; consumption surge a silver lining

The first full month Goods and Services revenue data available after rate cuts reveals India collected Rs 1.70 lakh crore in gross GST in November — 0.7 per cent higher than a year earlier but otherwise a year’s low. The collections excluded proceeds from compensation cess, government sources said even as surge in consumption, reflected in risen turnovers of most companies, proved a silver lining giving confidence in the sustainability of next generation GST reforms.

The government had rolled out GST rationalisation starting September 22, reducing tax slabs to two — 5 per cent and 18 per cent. A parallel 40 per cent tax slab was fixed for sin and demerit goods.

In October (which compensation cess was included in collections) gross GST revenue was Rs 1.95 lakh crore — higher than Rs 1.87 lakh crore in the corresponding month previous year. Gross GST collections (excluding cess) in November were Rs 1.70 lakh crore against Rs 1.69 lakh crore in the same month last year.

October collections rose on GST rate cuts in September with the government awaiting November GST data to determine the scale of consumption revival. “GST reforms were meant to boost consumer savings and business enthusiasm. The impact of these measures is clearly visible in data. Taxable value of all supplies under GST grew by 15 per cent during the two-month period of September-October 2025, compared to the same period in 2024,” top Finance Ministry sources said.

Officials said growth in the same period last year was 8.6 per cent.

“This surge in taxable value (company turnover) demonstrates strong consumption uplift, stimulated by reduced rates and improved compliance behaviour. It vindicates our strategy that reducing rates on essentials and mass-use sectors would create demand-side buoyancy — a Laffer Curve-type demand uplift,” officials noted.

They said the trends confirmed that GST next-gen reforms had not disrupted revenue stability, and that consumption-side buoyancy had begun to translate into higher taxable value in key sectors.

The government shared data to show strong growth in rationalised sectors.

“Growth has especially been strong in sectors where rate rationalisation was implemented such as in FMCG, pharms, foods products, automobiles, medical devices, textiles,” they said.

In these sectors, the taxable value of supplies has seen significantly higher growth, confirming that lower GST rates translated directly into higher consumer spending.

Sources said it was visible that while the next-gen reforms resulted in significant savings and increased consumption, industry, too, passed on the GST savings to the final consumers and ensured that there was no supply side deficiency.

Data on growth of taxable supply value (proxy for consumption number) for September-October 2024 and September- October 2025 respectively is as follows across rationalised sectors.

Prepared food stuff excluding beverages, tobacco, pan masala (11 per cent; 17 per cent); Buses and passenger cars (12 per cent; 20 per cent); Pharmaceuticals (5 per cent; 13 per cent); Cement (2 per cent; 19 per cent); goods carriers and other vehicles (2 per cent; 12 per cent); tractors (11 per cent; 17 per cent); Medical devices (16 per cent; 19 per cent), leather (9 per cent; 18 per cent).

Two sectors where the government did not see as much growth in consumption despite tax cuts are textiles (12 per cent; 8 per cent) and two wheelers and bicycles (23 per cent; 1 per cent %).

In all remaining sectors the growth was 12 per cent to 28 per cent.

“The data is based on tax returns,” sources said.

They added that most large states had clocked higher revenues between October and November with Haryana seeing 17 per cent growth, Kerala 8 per cent, Maharashtra 4 per cent, Assam 18 per cent, Gujarat 1 per cent and Tamil Nadu 2 per cent.

Punjab, however, recorded a decline in revenue reporting minus 13 per cent growth, and UP showing only 1 per cent growth. "States have been net gainers post GST rationalisation. As far as larger industrialised states go, there has been tangible growth in revenue," sources said.