Net GST growth slumps to 3.3% in December, as revenues slow and refunds rise 45%

India’s gross Goods and Services Tax (GST) receipts increased at the second-slowest pace in 43 months in December, while growth in net GST collections, after adjusting for refunds, slumped to 3.3%, the weakest in financial year 2024-25.

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December’s gross GST inflows, for transactions undertaken in November, were a tad under ₹1.77 lakh crore, hitting a three-month low and reflecting 7.3% growth in comparison to the same month in 2023. Growth has only slumped to these levels twice in over three and a half years: in June 2024, when gross receipts rose 7.3%; and in September 2024, when growth had hit a 40-month low of 6.5%.

Part of the sharper moderation in net collections’ growth vis-à-vis gross receipts, can be explained by a 45.3% uptick in refunds to taxpayers, which touched ₹22,490 crore. Net receipts stood at ₹1,54,366 crore in December.

Domestic, import tax revenues slow

In November, gross GST receipts were up 8.5%, but net collections had risen at a faster pace of 11.1%. This was linked to an 8.9% drop in refunds, led by a nearly 20% decline in taxes repaid on domestic transactions. By contrast, domestic refunds were up 31% in December, and refunds to exporters were up 64.5%.

Prior to refunds, revenues from domestic transactions were up 8.4% in December, lower than the 9.4% growth seen in November, while revenues from imports grew just 3.9%, slowing from 5.9% in November.

Overall growth in net GST revenues in the first nine months of 2024-25 now stands at 8.6%, with collections of almost ₹14.45 lakh crore, slowing from the 9.2% growth recorded till November. The Centre has penned in an expected growth of 11% in its Budget arithmetic for this year.

‘Linked to GDP growth trends’

The GST kitty growth is in line “with the bit of a slowdown in GDP growth”, reckoned Abhishek Jain, indirect tax head and partner at KPMG. “As it is expected that the GDP growth will inch north in this quarter, the GST collections should mirror the same,” he said.

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Domestic transactions grew about 8%, as four States recorded a contraction in GST revenues compared to seven in November. Arunachal Pradesh remained the worst hit for the third straight month, with revenues dropping 27% in December, followed by Meghalaya (-12%).

Concerns in large States

Manipur reported yet another month of revenue slippage, with the pace of contraction doubling to 8% from 4% in November. GST receipts also dropped 6% in Andhra Pradesh, from a 10% decline In November.

14 States reported 8% or higher growth, led by Sikkim (30%), Haryana (28%) and Punjab (22%), but a dozen of them reported lower growth, including large States like Uttar Pradesh and Madhya Pradesh (up 1% each), Bihar (2%), West Bengal (3%) and Gujarat (4%).

“The below 5% increase in major states like U.P., Bihar, W.B., Gujarat, and M.P. would be an area of concern for policy makers who may be considering the sectoral breakdown of the GST collections in these States to understand the reasons for the same,” remarked M.S. Mani, partner at Deloitte India.