India’s gross Goods and Services Tax (GST) collections saw a 7.5% year-on-year increase in July, reaching Rs 1.96 lakh crore, but net collections grew much slower due to a sharp rise in refunds.
GST Collections: A Mixed Picture
Gross GST collections, which account for sales in June, climbed to Rs 1.96 lakh crore. This marks a 7.5% increase compared to the same period last year, picking up slightly from June’s 6.2% growth rate.
However, this is the second consecutive month where growth has been in single digits, following robust double-digit growth earlier in the financial year. After factoring in refunds, net GST collections saw a modest 1.7% increase, reaching Rs 1.69 lakh crore.
The Big Jump in Refunds
The primary reason for the slower net growth is a significant surge in refunds. Total refunds issued in July amounted to Rs 27,147 crore, a sharp 66.8% jump year-on-year.
Breaking this down, domestic refunds more than doubled, soaring by 117.6% to Rs 16,983 crore. Refunds for imports also increased by 20% to Rs 10,164 crore, indicating a widespread increase in payouts to businesses.
Domestic vs. Import Revenues
Revenue collections from domestic transactions showed better momentum, growing by 6.7% to Rs 1.43 lakh crore in July. This was an improvement from the 4.6% growth observed in the previous month.
In contrast, GST collections from imports increased by 9.7% year-on-year, totaling Rs 52,712 crore. While this was an increase, the pace of growth was slower compared to June’s 11.4% rise.
Expert Insights on Refund Trends
Experts suggest that the substantial increase in GST refunds is the main contributor to the muted net revenue growth. MS Mani, Partner at Deloitte India, noted that the stability in online refund processes and quicker sanctions are beneficial for businesses.
Abhishek Jain, Indirect Tax Head and Partner at KPMG, added that higher refunds on domestic supplies could be linked to excess tax payments or adjustments due to inverted duty structures. He emphasized that these increased refunds would help improve cash flows for businesses.
State-wise Performance Snapshot
Out of 38 states and Union Territories, 20 recorded gross GST collection growth higher than the national average of 7.5%.
Maharashtra led the pack with Rs 30,590 crore in collections, growing by 6%. Karnataka followed with Rs 13,967 crore (7% growth), Gujarat with Rs 11,358 crore (3% growth), and Tamil Nadu at Rs 11,296 crore (8% growth).
However, some regions experienced a contraction in collections, including Jammu & Kashmir (-5%), Chandigarh (-5%), Manipur (-36%), Mizoram (-21%), and Jharkhand (-3%).
Key Takeaways
- Gross GST collections rose 7.5% to Rs 1.96 lakh crore in July.
- Net GST collections grew only 1.7% due to a 66.8% surge in refunds.
- Domestic refunds more than doubled, while import refunds also saw a notable increase.
- Experts view the increase in refunds as a positive sign for business cash flow.
- State performance varied, with some states showing strong growth and others experiencing contraction.
This data highlights the ongoing complexities and evolving dynamics within India’s GST framework, balancing revenue collection with support for businesses through efficient refund processes.
