GST Growth Slows to 6.5% in September Amid Concerns Over Tax Buoyancy
The growth in monthly Goods and Services Tax (GST) collections further weakened in September, with gross collections rising by just 6.5% compared to a 10% increase in August.
The total GST revenue for September stood at Rs 1.73 lakh crore, up from Rs 1.62 lakh crore in the same month last year. This slowdown comes as a crucial Group of Ministers (GoM) meeting on rate rationalization approaches, raising concerns about the overall tax buoyancy.
GST Revenue Trends Show Decline
In July 2024, GST collections had shown a healthier growth rate of 10.3%, contributing to a year-to-date revenue rise of 9.5%, totaling Rs 10.87 lakh crore. However, the sharp dip in September’s growth signals a slowdown that could influence upcoming decisions of the GoM on GST rate structures and revenue enhancement measures.
“With nominal GDP growth of 11% so far in FY25, GST growth at 9.1% and a tax buoyancy of less than 1 may concern the GST Council,” stated Vivek Jalan, Partner, Tax Connect Advisory Services LLP.
Impact on State Revenue and Refunds
Net revenue growth almost halved to 3.9% in September, compared to 6.5% in August, primarily due to a significant increase in refunds. GST refunds grew by 31%, with Integrated GST (IGST) refunds accounting for 70% of the total and increasing by 40% during the month.
“Major rise in GST refunds, especially IGST export refunds, depicts efforts of the tax authorities in expediting refunds and the policy makers in simplifying refund processes,” said MS Mani, Partner, Deloitte India.
Revenue Growth Across States
Several large states reported subdued growth in GST collections. Maharashtra and Tamil Nadu recorded a 5% growth, while Gujarat showed no growth in gross revenue. Uttar Pradesh registered a 3% growth, Rajasthan 2%, and Karnataka saw a relatively higher growth of 8%.
GST Council Meeting to Address Revenue Concerns
The upcoming GST Council meeting, scheduled for October 19-20, is expected to address these revenue concerns and consider new strategies for enhancing GST collection. “With tax buoyancy moving southwards, it is expected that the next GST Council meet should see some far-sighted measures on revenue enhancement,” added Jalan.
The slowdown in GST revenue growth, especially at a time of rising economic activity, indicates the need for a comprehensive review of GST rate structures and policies to ensure sustainable growth in tax collections moving forward.
