Indirect Tax Collection Impacted in November Due to GST Rate Cut
As per the finance ministry’s data, the gross GST collection rose at a slower pace of 0.7 per cent in November at Rs 1.70 lakh crore, as domestic revenues declined
New Delhi: With the goods and services tax (GST) rate cut in the next-gen tax reforms, the indirect tax collections impacted to some extent as the GST collection in November recorded meagre growth of 0.7 per cent to reach over Rs 1.7 lakh crore, marking the lowest monthly mop-up since February 2024. The GST collection is related to the goods consumed and services availed in October. The GST rate cut came into effect from September 22, the first day of Navratri.
As per the finance ministry’s data, the gross GST collection rose at a slower pace of 0.7 per cent in November at Rs 1.70 lakh crore, as domestic revenues declined. “Gross GST collection was over Rs 1.69 lakh crore in November 2024, while the gross domestic revenues declined 2.3 per cent to over Rs 1.24 lakh crore,” the government said on Monday.
However, it is learnt that the decline follows the reduction of GST rates for 375 items, effective September 22, while tax revenues from the import of goods grew 10.2 pc to Rs 45,976 crore in November.
As part of the GST reform, the government has rationalised rates with two main rates of 5 per cent and 18 per cent along with a 40 per cent rate on sin goods such as tobacco and pan masala, while the 12 per cent rate, as well as the compensation cess, have been done away with. A new health security se national security cess is also on cards for sin products like cigarettes and tobacco products.
Though the GST mop-up remained almost flat in November, the government however defended the rollout of next-gen tax rates, indicating that the rate rationalisation of the indirect tax is providing the desired boost to consumption. “The rate structure of GST has changed now and the compensation cess is no longer part of the core tax structure. The trends confirm that GST next-gen reforms have not disrupted revenue stability, and that consumption-side buoyancy has begun to translate into higher taxable value in key sectors,” a source said.
Commenting on the decline of GST collections, Karthik Mani, partner- indirect tax at BDO India said that this drop is clearly due to the effect of GST rate reductions coming into effect from 22 September 2025. “It was hoped that the increase in volume of purchases due to increased affordability from the rate reduction, that too, in the festive period of Diwali, which traditionally sees significantly high demand, would offset the drop in revenue due to GST rate reductions, but instead, there is a reduction in the Gross domestic GST collections,” Mani said.
Mani further said that while previously the compensation cess collection was also included in the GST collection data, present data has treated cess separately. “If the cess is also considered as a part of gross domestic GST collection, the numbers would show a further dip, since the cess collection has reduced by two-thirds, mainly due to only tobacco now being subject to the cess and other items like aerated beverages and motor vehicles going outside the ambit of cess,” he said.
