GST 2.0 rate cuts: GST collection in October rises to Rs 1.95 lakh crore, boosted by festive demand

India’s goods and services tax (GST) collections rose 4.6% in October 2025 to Rs 1,95,936 crore, up from Rs 1,87,346 crore in September, according to official data. Of this, domestic revenue increased 2% to Rs 1.45 lakh crore, while tax from imports surged 12.84% to Rs 50,884 crore. GST refunds also jumped 39.6% year-on-year to Rs 26,934 crore.

Steady collections

Data from the Ministry of Finance shows that net GST revenue stood at Rs 1.69 lakh crore in October 2025, compared with Rs 1.68 lakh crore a year earlier. For the April–October 2025 period, total GST revenue reached Rs 13.89 lakh crore, marking a 9% rise from Rs 12.74 lakh crore in the same period last year.

The GST 2.0 reforms, effective from September 22, 2025, streamlined the earlier four-tier tax system (5%, 12%, 18%, 28%) into two primary slabs — 5% and 18% — in what was described as the most significant tax rationalisation since GST’s rollout in 2017. The restructuring aimed to make products more affordable and stimulate demand amid slowing economic momentum.

The new rates cover nearly all goods except tobacco-related products such as pan masala, gutkha, cigarettes, and zarda, which continue under the higher tax category. The move was hailed by industry bodies and consumers alike for bringing clarity and simplicity to the tax system, though policymakers acknowledged that short-term revenue moderation was inevitable.

According to Vivek Jalan, Partner at Tax Connect Advisory Services, October’s collections represent a “stabilising phase” in the new GST regime. “Even after the GST 2.0 rate cuts, the growth in collections by 0.6% reaffirms that the boost in consumption has, to an extent, balanced the revenue de-growth,” Jalan said. He added that October’s figures also reflect the pent-up consumer spending unleashed after the Prime Minister’s August 15 announcement of the revised GST framework.

Inverted duty refund

However, Jalan warned that the new structure has deepened the inverted duty issue in several sectors — including packaging, pharmaceuticals, and agriculture — where input taxes remain higher than output taxes. “All such taxpayers will apply for inverted duty refunds starting November 2025. As per new norms, 90% of refunds must be processed within seven days,” he noted.

This could lead to a temporary surge in refund outflows through November and December, which may impact net collections. Jalan emphasised that a clearer picture of stabilised GST revenue will emerge only after these refund adjustments are completed.

Another factor weighing on collections is the withdrawal of the GST Compensation Cess, which had been budgeted at Rs 1.7 lakh crore for FY 2025–26. Jalan said this removal, combined with increased refund liabilities, could slightly dent the government’s fiscal outlook.

As of October 2025, central GST (CGST) collections stand at ₹5.36 lakh crore, or 54% of the ₹10.1 lakh crore target for the fiscal year. Jalan cautioned that the government’s 11% projected growth in GST collections for FY26 may face pressure, though the broader fiscal balance remains supported by rising consumption and compliance efficiency.

Economists see the GST 2.0 reforms as a long-term structural positive, arguing that the potential for sustained economic expansion outweighs the short-term fiscal trade-offs. With festive consumption, infrastructure spending, and corporate compliance improving, India’s indirect tax base is expected to broaden further.

As Jalan summed up: “GST 2.0 marks the beginning of a new phase in India’s tax journey — one that focuses on simplicity, consumption, and compliance-driven growth. The coming months will reveal how well the system absorbs these changes while maintaining fiscal momentum.”