GST Collections Grow 6.1% in December 2025 as Rate Cut Impact Plays Out

India’s Goods and Services Tax (GST) collections showed a moderate but steady recovery in December 2025, signalling early stabilisation after the September GST 2.0 rate rationalisation. Gross GST revenue rose 6.1 per cent year-on-year to Rs 1.74 lakh crore compared with Rs 1.64 lakh crore in December 2024 and Rs 1.70 lakh crore in November 2025, according to official data released by the government. While this marks an improvement, collections remain well below the record high of Rs 2.36 lakh crore reported in April 2025, underscoring the revenue trade-offs of recent rate cuts.

How December Numbers Break Down

The headline growth masks a divergence between domestic consumption and import-linked collections. Domestic GST revenue rose just 1.2 per cent YoY to Rs 1.22 lakh crore, reflecting the direct impact of lower tax rates across several mass consumption categories. GST from imports jumped 19.7 per cent YoY to Rs 51,977 crore, providing the bulk of incremental growth in December. GST refunds increased 31 per cent YoY to Rs 28,980 crore, indicating faster processing and higher export-related claims.

Net GST revenue (after refunds) rose 2.2 per cent YoY to Rs 1.45 lakh crore. Compensation cess collections fell sharply by 64.7 per cent YoY to Rs 4,238 crore, following the government’s decision to phase out the cess on several products. This mix highlights that while headline GST growth remains positive, underlying domestic demand-linked tax buoyancy has softened in the near term.

GST 2.0: The Cost of Rationalisation

On 22 September 2025, the government implemented a major GST rate rationalisation, cutting rates on a wide range of items from soaps and daily-use FMCG products to small passenger cars and eliminating the compensation cess on several categories. The move was aimed at easing inflationary pressures, supporting consumption, and simplifying the tax structure.

However, the immediate fiscal impact has been visible. Lower effective tax rates have reduced monthly GST inflows, especially from domestically produced and consumed goods. December’s muted growth in local GST revenue is consistent with this transition phase, where volume growth is yet to fully offset rate reductions.

Tax experts note that this moderation is broadly in line with expectations. As one industry observer pointed out, the domestic slowdown reflects the intended outcome of GST rationalisation, while the sharp rise in import GST merits closer scrutiny, particularly in the context of India’s long-term self-reliance goals.

Import GST: A Cushion with Caveats

The strong growth in import-related GST collections suggests robust inbound trade and higher value imports, possibly driven by capital goods, electronics, energy-related items, and festive season stocking. While this has helped cushion overall GST revenues, it also raises questions. From a policy perspective, over-reliance on import GST is not structurally ideal, especially when the broader economic narrative emphasises domestic manufacturing and value addition. If import growth continues to outpace domestic GST expansion, it could signal uneven demand recovery or substitution toward imported goods in certain segments.

FY26 So Far: A Stabilisation Phase

Looking at monthly GST collections across FY26 to date, a clear pattern emerges. April began on a high note, aided by year-end adjustments and strong economic momentum. Subsequent months saw moderation, with October receiving a festive season boost, while November and December reflected consolidation after GST 2.0 came into effect. This trajectory suggests that FY26 is shaping up as a transition year for indirect taxation, balancing revenue stability with growth-supportive reforms. The government appears willing to tolerate short term revenue softness in exchange for lower inflation, simpler compliance, and stronger medium term consumption growth.

What to Watch Going Ahead

Several factors will determine the GST trajectory in the coming months:

• Consumption response to lower prices: If rate cuts successfully stimulate demand, volume-led growth could lift domestic GST collections in H2FY26.
• Import trends: Sustained double-digit growth in import GST may support revenues, but could raise trade balance and policy concerns.
• Refund efficiency: Higher refunds, while positive for exporters, will continue to affect net GST numbers.
• Economic growth momentum: With GDP growth remaining resilient, GST collections are likely to stabilise gradually rather than surge sharply.

Conclusion

December 2025’s 6.1 per cent GST growth reflects resilience, not exuberance. The data confirms that GST 2.0 has temporarily moderated domestic tax collections, while import-led revenues are doing the heavy lifting. For policymakers, the challenge will be to ensure that lower tax rates translate into higher consumption and formalisation over time, restoring GST buoyancy without reversing reform momentum.

In that sense, December’s numbers are less a warning sign and more a checkpoint in India’s evolving indirect tax framework, one that prioritises growth and affordability today, while banking on scale and compliance to drive revenues tomorrow.

Disclaimer: The article is for informational purposes only and not investment advice.