(Image Source: ET CFO)
India collected Rs 1.75 lakh crore in Goods and Services Tax during December 2025, a 6.1 percent increase from Rs 1.64 lakh crore in the same month last year. This represents the strongest growth rate in three months, though the underlying numbers reveal a more complicated story about where the money is coming from and what it means for the economy heading into 2026.
The Import Surprise
The real driver of December’s growth came from taxes on imported goods. Import-related GST jumped 19.7 percent to Rs 51,977 crore, nearly offsetting weakness elsewhere. Meanwhile, taxes collected on domestic transactions barely moved, rising just 1.2 percent to Rs 1,22,574 crore.
What This Split Means
The divergence between imports and domestic collections suggests:
- Consumers are buying more foreign goods
- Domestic spending remains cautious and subdued
- Import duties provide most of the year-on-year growth
- The economy is not growing uniformly across sectors
The weakness at home reflects fallout from the government’s September decision to slash GST rates. The tax system went from four rates to essentially two: 5 percent on essentials and 18 percent as the main rate, with 40 percent on luxury items. Around 375 products saw rate cuts. Companies and consumers are still adjusting to these changes, which explains why domestic collections have stalled while import duties continue climbing.
Refunds and Real Revenue Growth
Refunds climbed 31 percent year-on-year to nearly Rs 29,000 crore in December. When you strip out these refunds, actual net GST revenue grew only 2.2 percent, a figure that better reflects true economic activity.
Why Refunds Matter
The refund surge reflects two important developments:
- Lower tax rates mean less money flows in initially
- Businesses are claiming input tax credits more effectively
- The new system provides better compliance mechanisms
- Net revenue growth of 2.2 percent is closer to reality than the 6.1 percent headline
Breaking Down the Collections
Central GST brought in Rs 34,289 crore. States collected Rs 41,368 crore. The Integrated GST, which covers inter-state sales and imports, reached Rs 98,894 crore. The Integrated GST component remains the largest, primarily because it captures all cross-border transactions.
Compensation cess, a fund meant to help states adjust to GST, plummeted to Rs 4,238 crore from Rs 12,003 crore a year earlier. The government scaled back this cess in September, now limiting it to tobacco and pan masala. This sharp drop reflects both the policy change and reliance on a narrower tax base.
The Overall Picture
Over the first nine months of the fiscal year (April to December 2025), GST collections totaled Rs 16.5 lakh crore, up 8.6 percent from Rs 15.2 lakh crore in the prior year. Last fiscal year ended with Rs 22.08 lakh crore collected, the highest annual total since GST launched in July 2017.
December’s figure sits below the full-year average of Rs 1.84 lakh crore monthly, a normal pattern when tax rates change. Businesses need time to adapt to new structures, and consumers take months to shift their buying habits in response to price changes.
What Happens Next for GST
The reliance on import taxes to drive growth creates a vulnerability. Key concerns include:
- Global trade slowdown could weaken import-related collections
- Rupee strength may reduce import demand
- Domestic demand needs to accelerate for sustainable growth
- Current momentum suggests moderate growth, not acceleration
Maharashtra, Gujarat, Karnataka, and Tamil Nadu led collections among states, consistent with their standing as manufacturing and trading hubs. The government needs GST growth to stay on track with a planned 4.4 percent fiscal deficit target. Current momentum suggests moderate growth rather than a sharp jump, which means policymakers will need to find revenue elsewhere or trim spending plans if growth slows further.
