GST Revenue and Economic Indicators

In November, the net revenues from the Goods and Services Tax (GST) experienced a year-on-year increase of 1.3%, resulting in a total of Rs. 1.52 trillion. Notably, this figure excludes the GST Compensation Cess receipts. The overall net GST collections, when including the cess receipts, saw a decline of 4.25% from November 2024.

Compensation Cess and Economic Activity

• Net GST Compensation Cess collections dropped significantly by 69.06% to Rs. 4,006 crore compared to nearly Rs. 13,000 crore from the previous year.
• Despite the decrease, government sources highlighted a rise in transaction volumes, indicating increased consumption that counterbalanced the GST rate cuts effective from September 22.

High-Frequency Economic Indicators

• Passenger-vehicle wholesales rose by 21% year-on-year to approximately 425,000 units.
• Railways freight volumes increased by 4.2% to 135.7 million tonnes.
• The demand for rural employment under the relevant scheme saw a 32% decline year-on-year.
• UPI transactions dropped by 1% in volume and 3.5% in value.
• Industrial output expanded at a mere 0.4% in October, marking a 14-month low, while the HSBC Purchasing Managers’ Index for manufacturing fell to a nine-month low of 56.6 in November.

Breakdown of GST Revenue

• Gross GST revenues for November were slightly over Rs. 1.7 trillion, representing a 0.7% increase.
• Revenues from domestic transactions fell by 2.3% compared to the previous November, totaling Rs. 1.24 trillion.
• Gross revenues from imports grew by 10.2%, helping to keep the overall net revenues positive.
• Refunds to exporters rose by 3.5%, while those on domestic transactions decreased by 12%, resulting in an overall refund reduction of 4% from November 2024 and 30.6% from October.

Fiscal Implications and Future Projections

Despite the challenges, net GST revenue still saw a minor increase of 0.6% in October, maintaining a strong absolute collection of ₹1.69 trillion. Over the first eight months of 2025-26, gross and net GST revenues have grown by 8.9% and 7.3% respectively. However, the GST compensation cess has declined by 14.3% to Rs. 84,144 crore.

The compensation cess is currently being used temporarily to repay loans taken during the pandemic to support states.

Insights from Economists and Analysts

Economist Aditi Nayar from ICRA noted the high GST collection targets for the rest of the fiscal year and anticipated potential shortfalls, although higher non-tax revenues might partially offset these concerns. The government estimates show a 15% rise in the taxable value of GST supplies during the September-October period of 2025, compared to an 8.6% increase in the previous year. This indicates a “Laffer curve-type” response where lower GST rates improved compliance and boosted demand.

Sector-Specific Growth

• Prepared food items: 17%
• Buses and passenger cars: 20%
• Pharmaceuticals: 13%
• Cement, ceramics, and glass products: 19%
• Goods carriers: 12%
• Two-wheelers and bicycles: 18%
• Tractors: 17%
• Medical devices: 19%
• Leather products: 18%
• Others: 28%

Challenges and Observations

Textile growth slowed to 8% from 12% due to global headwinds and weak export demand. Growth in two-wheelers decreased to 18% from 23% as consumers leaned towards small cars. Analysts expect the GST collections over the next four months to be crucial in determining if fiscal year targets can be met.