GST collections rise 4.6% in Oct; experts see robust consumption but warn of emerging risks

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."

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."

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."

Source:-  CNBCTV 18