45% Refund Surge Destroys GST Growth: Collections Hit a 3-Year Low

GST collections dip slightly after festive peak

45% Refund Surge Destroys GST Growth: Collections The government reported that gross Goods and Services Tax (GST) collections grew 7.3% year-on-year to ₹1.77 lakh crore in December. However, this represented a 3% sequential decline, reaching a three-month low after the festive season highs.

Breakdown of December’s GST figures includes:

• Central GST (CGST): ₹32,836 crore
• State GST (SGST): ₹40,499 crore
• Integrated GST (IGST): ₹47,783 crore
• Cess: ₹11,471 crore

In comparison, GST collections in November stood at ₹1.82 lakh crore, growing 8.5% year-on-year, while October’s ₹1.87 lakh crore was the second-highest monthly figure recorded. The highest-ever GST revenue was achieved in April 2024, at over ₹2.10 lakh crore.

For the fiscal year to date, GST collections reached ₹16.33 lakh crore, marking a 9.1% increase compared to the same period last year. During the festive season (August to December), collections rose by 8.24%.

Tax experts highlighted the evolving dynamics of GST administration. Vivek Jalan, partner at Tax Connect Advisory Services LLP, pointed out that GST reflects cooperative federalism, but the gap in collections between state and central GST formations indicates a move toward “competitive federalism.” State GST authorities oversee 40% more taxpayers but collect only 13% more revenue than central GST authorities.

M.S. Mani, partner at Deloitte India, noted the framework’s stability, with an 8.6% annual growth in collections despite a 13.5% rise in refunds. However, he expressed concern over slow revenue growth in major states like Uttar Pradesh, Bihar, and Gujarat.

Saurabh Agarwal, tax partner at EY India, attributed the decline in December to seasonal shifts in consumer spending but highlighted strong growth in states like Jammu & Kashmir and Sikkim, reflecting robust regional economies. He also linked reduced GST on imports and increased export refunds to India’s “Atmanirbhar Bharat” initiative promoting self-reliance.

45% Refund Surge Destroys GST Growth: Collections The stock market in India started 2025 on a positive note, with benchmark indices gaining strength, largely driven by auto and banking stocks. The BSE Sensex closed higher by 0.47% at 78,507.41, and the Nifty50 rose 0.41% to 23,742.90. Notable developments included Maruti Suzuki’s strong performance, with a 30% increase in December wholesales, and a possible IPO of Reliance Jio Infocomm, estimated to raise ₹35,000-40,000 crore.

Other updates:

• Hi-Tech Pipes Ltd reported record Q3 sales, up 26.1% YoY.
• AB Cotspin India secured a ₹7.50 crore order for cotton yarn.
• The Bank Nifty showed a modest recovery, and GST collections for December rose by 7.3% YoY, at ₹1.77 trillion.
• Crude oil futures also gained, following optimistic economic outlooks from China.

45% Refund Surge Destroys GST Growth: Collections Analysts are upgrading several stocks, such as Kotak Mahindra Bank (target price raised to ₹2,070) and Maruti Suzuki (target price ₹13,500), while also maintaining positive outlooks for M&M, HAL, and Larsen & Toubro.

Key market focus: The upcoming Union Budget and pre-Budget meetings with the finance sector are likely to be significant for market trends in the coming weeks.

• China’s Caixin PMI Manufacturing (Dec 2024): The index came in at 50.5, missing estimates of 51.7 and down from 51.5 in November, signaling slower-than-expected growth.

• F&O Ban: Manappuram shares are under the ban for trading in the F&O segment.

• India Daybook:
  • Sandur Manganese has received approval to increase its iron ore production limit.
  • VST Tillers reported a 38.5% increase in December sales.
  • RailTel secured a ₹78.43 crore order.
  • Goa Carbon resumed operations at its Bilaspur unit.
  • Mercury Ev-Tech announced a stake acquisition in DC2 Mercury Cars.
  • VPRPL received a ₹313.4 million project for a fintech digital institute.
  • DCX Systems landed a $2.26 million order.
  • Power Sector: India’s power consumption rose by 6% YoY in December.
  • Maruti Suzuki saw a 30% YoY increase in December production.
  • Gravita started producing recycled aluminum alloys in Ghana.
  • Coal India reported a 5.33% increase in coal production in December.
  • NTPC showed a 3.82% YoY increase in power generation.
  • CSB Bank posted a 22.2% YoY growth in deposits.
  • Vodafone Idea plans to launch 5G mobile broadband in March with competitive pricing.
  • South Indian Bank saw an 11.94% rise in gross advances YoY.
  • Indian Bank‘s CEO Shanti Lal Jain retired on January 1, 2025.
  • Tata Motors‘ domestic sales grew by 1% YoY.
  • Suven Pharmaceuticals merged its subsidiary Casper Pharma.
  • Reliance Industries acquired a major industrial land parcel in Maharashtra.
  • HDFC Life is facing a ₹270.58 crore GST demand.
  • Ceramic Stocks saw a price hike in propane in the Morbi region.

• Market Outlook: The market is expected to open flat, with some specific stock actions. Nifty and Sensex are showing signs of a negative bias.

• Stocks to Watch: IRB Infrastructure Developers is showing potential for an upswing in price.

• Currency: The Indian Rupee hit a new low of 85.6450 against the US Dollar, driven by demand and the USD’s strength.

• Jio IPO: Reliance Industries is preparing for a ₹35,000-40,000 crore IPO for its telecom arm, Reliance Jio Infocomm, with a projected valuation of $120 billion.

45% Refund Surge Destroys GST Growth: Collections India’s Goods and Services Tax (GST) growth slowed significantly in December 2024, with net collections rising by just 3.3%, marking the weakest growth of the fiscal year. This slowdown is attributed to a combination of factors, including a 45% rise in refunds, which reached ₹22,490 crore. Gross GST receipts for December, covering November transactions, totaled just under ₹1.77 lakh crore, growing by 7.3%, the second-lowest increase in the past 43 months.

While gross receipts showed a moderate increase, the sharp dip in net collections was largely due to a higher volume of refunds, especially to domestic transactions (up 31%) and exports (up 64.5%). Domestic revenues grew by 8.4%, but this was a decline from the 9.4% growth seen in November. Imports contributed only 3.9% growth, a slowdown from the previous month’s 5.9%.

In the first nine months of the fiscal year 2024-25, net GST revenues grew by 8.6%, falling short of the government’s 11% growth target for the year. This dip reflects broader economic trends, with GST growth aligning with the slowdown in GDP. The collection figures also highlight regional disparities, with several large states such as Uttar Pradesh, Bihar, and Gujarat showing minimal growth, raising concerns for policymakers. However, some smaller states, including Sikkim, Haryana, and Punjab, recorded higher growth rates.

45% Refund Surge Destroys GST Growth: Collections This trend suggests that while there are signs of economic resilience in certain areas, the overall pace of economic recovery remains uneven, with some regions struggling to match the national average in GST growth.