Slowing consumption in recent months appears to be taking a toll on GST collections. While growth in collections at the national level was lower compared to the last fiscal year, many of the larger states, particularly in South India, have reported subpar growth in the first half of this year.
From April to October 2024, total domestic GST collections grew by 10.5 per cent y-o-y to ₹9.65 lakh crore. This is around 4 percentage points less than the 14.6 per cent growth recorded for the same period in April to October 2023. The polls season, flood situations in several parts of the country, especially the South, and an overall slowdown in consumer spending are likely reasons for slow growth in GST.
However, there are also wide variations in collections growth among top states.
While Maharashtra, Karnataka, Gujarat, Uttar Pradesh, and Delhi managed to clock higher-than-average GST growth at 11.7, 10.9, 10.7, 12, and 20 per cent, respectively, the southern states of Tamil Nadu, Andhra Pradesh, Telangana, and Kerala are trailing the national growth by a significant margin.
Tamil Nadu’s GST collections for the seven months at ₹75,078 crore have seen a 6 per cent y-o-y growth compared to a 16.8 per cent rise in the same period last year. Telangana’s GST collections grew 5.2 per cent compared to 15.9 per cent in the prior period. Andhra Pradesh’s GST collections grew 4 per cent compared to 8 per cent.
Experts note that there could be various factors that lead to variations in GST growth across states, and revenue is not just influenced by population size but also by states’ purchasing power, income levels, and consumption basket.
“If you look at the basket of GST, some of the products with the highest taxes are automobiles, sin goods, cement, and ACs. Consumption of these items may be similar across large states, but the state where people consume more of these products will have higher gross collections,” MS Mani, Partner, Deloitte India, said. Sectoral data is needed to understand the reasons for the variations between states, he added.
South India also saw a number of heavy rainfall events during the period, hitting consumption. Analysts also note that the southern states tend to spend more on gold and real estate, which attract GST at relatively lower rates than luxury goods and automobiles.
However, analysts also caution that GST collections do not give a complete picture of consumption, as GST rates are high for luxury items. “The GST collections have been affected by the base effect this year. High-frequency data suggests that rural demand is picking up. Two-wheeler sales, tractor sales, and real wages of agricultural and non-agricultural labourers have been showing steady growth,” Paras Jasrai, Senior Economic Analyst, India Ratings and Research, said.
Analysts estimate that total GST revenue in FY25 could fall short of the budgeted 11.6 per cent y-o-y growth, given the m-o-m growth rates. October GST (including imports) was ₹1.87 lakh crore, the second-highest monthly collection ever after April 2024, when it was ₹2.10 lakh crore.