GST collections grow in Dec, but higher growth needed to match Budget expectations

Driven by higher revenues from domestic transactions, India collected ₹1.77 lakh crore as goods and services tax (GST) in December. The tax collection was 7.3% higher than ₹1.65 lakh crore collected during same month the year earlier, but slightly lower than ₹1.82 lakh crore collections in November, 2024.

For the first nine months of the current fiscal (FY25), GST collections stand at ₹16.3 lakh crore, reflecting a 9.1% year-on-year (YoY) growth compared to ₹15 lakh crore collection during the same period last fiscal. On an average, GST collections have been to the tune of ₹1.81 lakh crore till date, a tad lower than ₹1.88 lakh crore estimated as monthly GST collections in the Union Budget 2024-25. The GST collections during the next three months will have to compensate for the low average in the first nine months. “Lower GST collections so far indicate that the mop-up for FY25 may be lower than what has been estimated in the Budget,” observes stock broking firm Motilal Oswal in its investor note.

According to the official revenue collection numbers released by the GSTN on January 1, gross domestic revenue rose by 8.4% to ₹1.33 lakh crore in December 2024 as compared to ₹1.22 lakh crore in December 2023. The increase in domestic revenue collections was even higher during the fiscal so far, as the April-December 2024 collection of ₹12.37 lakh crore was 10.1% higher than ₹11.24 lakh crore collected during the same period in FY24. In comparison, revenue from imports (IGST & Cess) in December 2024, at ₹44,268 crore, was just 3.9% higher than ₹42,612 crore during the same month last year. Overall growth in revenue from imports during the nine month period was 6%.

Meanwhile, in a recent note on government’s fiscal position, Aditi Nayar, chief economist and head - Research & Outreach, ICRA Limited had pointed out in April-November FY2025, the net tax revenues rose by a marginal 0.5% YoY, non-tax revenues expanded by about 50% boosted by the RBI dividend, and revenue expenditure grew by 7.8%, while capital expenditure (capex) continued to contract by 12.3%. Based on this observation, Nayar estimates that the government’s capex needs to expand by 65% YoY in December 2024-March 2025 or record a monthly run rate of ₹1.5 lakh crore, to meet the revised budget estimates for FY2025. Stating that it appears increasingly daunting, she notes the government’s capex target of ₹11.1 lakh crore for FY2025 will be missed by a margin of at least ₹1.0-1.5 lakh crore.

“The anticipated miss in the capex target is expected to offset any shortfall on account of disinvestment and taxes, as well as the impact of the recent supplementary demand for grants. Accordingly, ICRA expects the fiscal deficit to mildly trail the FY2025 RBE of ₹16.1 lakh crore or 4.9% of GDP," Nayar states.

Shortfall in tax revenues, if at all, may get balanced through a sharp cut in capital expenditure. And that plan seems to be well on track.