GST Collection Sees 9% Rise in October 2024, Driven by Strong Domestic Demand and Compliance Measures
The Goods and Services Tax (GST) collection in October 2024 surpassed expectations, grossing over ₹1.87 lakh crore. This marks the second-highest monthly collection since the inception of GST in July 2017, a testament to the continued robustness of India’s domestic demand, improved compliance measures, and the government’s efficient handling of GST refunds. The robust collection also sets a promising tone for the second half of FY25 despite global economic challenges, signaling the resilience of the Indian economy in the face of adverse international conditions.
Record-Breaking Numbers Despite Global Headwinds
October’s GST revenue reached ₹1,87,346 crore, recording an 8.9% year-on-year increase. This figure comes close to the record collection of ₹2.10 lakh crore, set in April 2024, and surpasses the previous second-highest monthly collection of ₹1,87,035 crore in April 2023. Notably, the October collection represents a 7.9% increase in net GST revenue to ₹1,68,041 crore, even after factoring in ₹19,306 crore in overall refunds—a significant annualized growth of 18.2%.
Stricter compliance measures and advancements in technology have enabled faster and more substantial refunds. The government reported a 42.8% jump in domestic refunds from ₹7,352 crore in October 2023 to ₹10,498 crore in October 2024, reflecting increased administrative efficiency that has unblocked working capital for small businesses.
Growth in Domestic Demand but Slower Import Revenue
October’s GST collection growth underscores the strength of India’s domestic demand, with a 10.6% year-on-year increase in revenues from domestic supplies. However, revenues from imports rose by less than 4%, impacted by slowing global demand and heightened geopolitical tensions. This divergence highlights the relative resilience of India’s internal economy despite challenges in global trade and economic fragmentation.
In its recent economic report, the Finance Ministry warned of potential disruptions to the second half of FY25, noting that “escalating geopolitical conflicts,” “deepening geoeconomic fragmentation,” and “elevated financial market valuations” in advanced economies could impact India. Deloitte India partner M.S. Mani acknowledged these risks but stressed that the strong domestic revenue growth throughout the April-October period reflects consistently high demand across India.
Sectoral Contributions: Festive Season Boosts Collections
October’s GST collections were buoyed by the festive season and strong performance in sectors like automobiles. As consumer spending during the festival season surged, GST collections also benefited, contributing to the month’s remarkable total. However, EY’s Saurabh Agarwal noted signs of a potential short-term slowdown in consumer spending after the sharp increase witnessed in the previous fiscal year. He emphasized that this single-digit growth could signal a cooling-off period for consumer demand.
Experts remain optimistic about India’s long-term economic prospects, pointing to the country’s expanding consumer base and the government’s pro-growth policies. KPMG’s Abhishek Jain highlighted the sustained strength of the GST system and the overall economic resilience, noting that collections nearing ₹1.9 lakh crore affirm the robustness of the domestic economy.
Refund Processing and Compliance Measures: A Boon for Small Businesses
One of the standout achievements of October’s GST administration was the accelerated processing of refunds. KPMG’s Abhishek Jain expressed satisfaction over the increased efficiency in GST refunds, which aid small businesses by unlocking their working capital. With a 43% increase in domestic refunds for October alone and an 8% cumulative increase for April-October 2024, experts say this improvement reflects the stabilization of the refund process, with fewer rejections on interpretative grounds.
This efficient handling of GST refunds is expected to ease cash flow constraints for small and medium enterprises, allowing them to invest in growth and meet the demands of the festive season. M.S. Mani of Deloitte noted that the reduced backlog and fewer refund rejections signal a maturing GST ecosystem that is becoming increasingly business-friendly.
Looking Ahead: Cautious Optimism Amid Global Uncertainty
While October’s GST collection figures have injected a dose of optimism, experts remain cautious about the broader economic environment. With escalating geopolitical tensions and volatility in global markets, India’s economy may face challenges in maintaining this level of growth. The Finance Ministry has urged caution, especially in light of potential disruptions from international conflicts and economic fragmentation.
In the near term, experts will be closely watching GST collections in November and December, as these figures will reflect the full impact of the festive season. The automobile sector, in particular, could be a bellwether for short-term trends, given its significant contribution to GST revenue.
Despite these challenges, the GST system’s ability to generate sustained high revenue from domestic supplies, coupled with efficient refund processing, bodes well for India’s economic resilience. By ensuring timely refunds and maintaining a steady flow of domestic demand, the government has laid a solid foundation for continued growth in GST collections.
Conclusion
India’s GST collection in October 2024 is a clear indicator of strong domestic demand and the positive impact of compliance and administrative efficiencies. While uncertainties persist due to global headwinds, the domestic economy appears poised for steady growth, supported by a robust GST system and a favorable business climate. Experts believe that India’s expanding consumer base, paired with pro-growth policies, will keep GST collections on a promising trajectory for the foreseeable future, even as they urge caution in the face of evolving global challenges.
