India’s Gross Goods and Services Tax (GST) collections continued their upward trajectory in May 2025, maintaining a strong momentum for the second consecutive month. According to official data released on June 2, 2025, gross GST revenues stood at ₹2,01,000 crore (US$ 23.52 billion), reflecting a 16.4% year-on-year (YoY) increase compared to May 2024. The April 2025 collection had set a record at ₹2,37,000 crore (US$ 27.74 billion), marking a trend of robust fiscal receipts.

The consistent performance above the ₹2 lakh crore threshold for two months in a row signals renewed economic activity, led by import-based GST contributions and sustained domestic consumption. Net GST collections, after refunds, stood at ₹1,74,000 crore (US$ 20.36 billion), showing a 20.4% rise from ₹1,73,000 crore (US$ 20.25 billion) recorded in the same month last year.

Breakdown of May 2025 GST Collections:

• Central GST (CGST): ₹35,434 crore (US$ 4.15 billion)

• State GST (SGST): ₹43,902 crore (US$ 5.14 billion)

• Integrated GST (IGST): ₹1,09,000 crore (US$ 12.76 billion), including ₹51,266 crore from imports

• Cess Revenue: ₹12,879 crore (US$ 1.51 billion)

• Total Refunds Issued: ₹27,210 crore (US$ 3.18 billion), down 4% from the previous year

The increase in IGST collections, particularly from imports, was a key factor in the month’s growth, supported by steady domestic consumption, albeit with regional disparities.

Import GST Surge Drives Growth

One of the standout elements in May’s GST data is the 25.2% surge in GST from imports, climbing to ₹51,266 crore (US$ 6.00 billion). This reflects:

• Higher import volumes, possibly due to inventory restocking and anticipation of global supply chain disruptions

• Increased commodity prices, including energy and electronics, leading to higher tax incidence

• A strong rupee-dollar exchange rate that incentivised large-volume imports

In contrast, domestic GST revenue increased by 13.7% to ₹1,50,000 crore (US$ 17.55 billion), showing stable growth but slightly trailing import-driven momentum.

State-Wise Variability in GST Growth

While the national figures indicate robust collections, state-wise GST growth revealed notable disparities, according to industry experts.

• High-Growth States:

  • Maharashtra

  • West Bengal

  • Karnataka

  • Tamil Nadu
    These states recorded 17-25% YoY growth, driven by large-scale manufacturing, IT services, and high consumption bases.

• Moderate-Growth States:

  • Gujarat

  • Andhra Pradesh

  • Telangana
    These showed subdued growth of up to 6%, possibly impacted by industrial stagnation or subdued commercial activity.

• Median-Growth States:

  • Madhya Pradesh

  • Haryana

  • Punjab

  • Rajasthan
    These witnessed average growth of around 10%, maintaining a steady contribution without significant fluctuations.

This regional imbalance in GST growth has raised discussions around structural economic shifts, urban-rural consumption divergence, and the need for targeted state-level reforms.

Industry Insights and Policy Implications

Ms. M S Mani, Partner at Deloitte India, stated that uneven state-wise GST growth indicates varying levels of consumption recovery across the country. She highlighted the need for infrastructure investments and state-level digitisation to bring more consistency in collections.

Mr. Pratik Jain, Partner at Price Waterhouse & Co LLP, believes that the 16.4% GST growth suggests a revival in consumption and business activity after several months of growth hovering around 11-12%. He mentioned that this performance could enable the government to reinitiate discussions around GST rate rationalisation, especially in sectors still burdened with multiple slab rates.

Mr. Saurabh Agarwal, Vice President at EY India, flagged that geopolitical uncertainties and the impact of global conflicts on trade routes might constrain GST growth in the upcoming months, particularly if import costs rise or supply chains face disruptions.

Mr. Vivek Jalan, Partner at Tax Connect Advisory Services, noted that May’s GST growth was driven more by imports than domestic consumption, with export refunds subdued. He interpreted this trend as an indication of inventory-driven GST rather than end-user-driven demand, pointing to potential volatility in the near term.

Sustained Revenue Indicates Fiscal Strength

Despite possible short-term risks, the back-to-back ₹2 lakh crore+ collections indicate that the government is on a strong fiscal footing. This level of revenue generation supports:

• Public infrastructure investments

• Social sector schemes

• Lower dependence on market borrowings

It also boosts investor confidence, as high GST collections reflect formal sector compliance, efficient tax administration, and growing economic transactions.

Key Drivers Behind the Surge

Several factors contributed to the strong performance in May 2025:

1. Rising imports of high-value goods amid global trade realignments

2. Tax administration improvements, including e-invoicing and real-time data reconciliation

3. Festive and seasonal demand in specific sectors like electronics, auto, and apparel

4. Widening of GST net to include more service providers and small businesses

5. Policy crackdown on GST evasion and frauds, particularly in e-commerce

These combined forces have not only increased revenue but also improved compliance and audit trails, allowing authorities to plug leakages.

Challenges Ahead: Sustainability and Volatility

While the numbers are encouraging, experts caution that sustaining such levels of GST collection will depend on:

• Stable global trade flows

• Robust domestic consumption beyond urban centres

• Continued reforms in tax structure, including simplification of rates and process efficiency

• Resilience of MSMEs, which contribute significantly to GST but remain vulnerable to cost and compliance burdens

Additionally, with export refunds shrinking by 4%, there are concerns over export competitiveness and input credit mismatches. Addressing these issues will be vital to ensure that net GST collections do not stagnate in future months.

GST Rate Rationalisation on the Horizon?

Given the strength in monthly revenues, the GST Council may now have fiscal space to discuss long-pending reforms such as:

• Merging the 12% and 18% slabs

• Reducing the number of exemptions

• Bringing fuel, electricity, and real estate fully under GST

These measures would simplify the GST regime, increase neutrality, and improve efficiency of credit utilisation across sectors.

Conclusion: A Positive Fiscal Signal with Caution

India’s GST collections in May 2025, crossing ₹2.01 lakh crore, reinforce the perception of a vibrant formal economy, strong import flows, and steady tax compliance. This marks a 16.4% YoY rise, building upon the historic April 2025 collections. However, the growth driven more by imports than domestic consumption suggests the need for cautious optimism.

As the government evaluates reforms, rate rationalisation, and state-wise policy support, sustained GST performance will remain a cornerstone of India’s fiscal stability and economic recovery in the post-pandemic, geopolitically turbulent world. The June collections and upcoming GST Council meeting will likely set the tone for future tax policy and growth momentum.

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