Import-led gains outpace domestic demand as overall mop-up slows

New Delhi, August 2, 2025 :GST collections in July rose 7.5% to ₹1.65 lakh crore. However, the growth was slower than last year. The increase was mainly driven by import-led GST growth, while signs of a domestic consumption slowdown continued to worry policymakers. Analysts say the current trend could affect fiscal momentum heading into the festive season.

July 2024 collections stood at ₹1.54 lakh crore. In contrast, July 2023 saw a stronger 11% year-on-year rise. Experts attributed this year’s softer rise to reduced domestic manufacturing and muted consumer activity in rural markets. GST collections from imports showed more robust growth, indicating a tilt towards foreign-sourced consumption rather than local production.

Central Board of Indirect Taxes and Customs (CBIC) officials noted that integrated GST (IGST) from imports rose significantly in July. The data reflected a stronger rebound in imported goods demand compared to local services and product categories. “The buoyancy from imports helped offset the drag from domestic consumption, particularly in small businesses,” a finance ministry official explained.

Among major contributing states, Maharashtra, Tamil Nadu, Karnataka, and Gujarat led GST collections. However, several states showed stagnation in revenue growth, underscoring the patchy nature of India’s economic recovery. States dependent on discretionary spending and tourism continued to lag behind, limiting the overall upward trajectory .

Union Finance Minister Nirmala Sitharaman said the figures are within expected bounds and reflect the government’s sustained efforts to improve compliance. She emphasized that multiple technology-driven initiatives, including e-invoicing and data triangulation, are helping plug tax leakages and boost collections in the medium term.

However, tax analysts warned that the moderation in monthly growth suggests caution. “The 7.5% rise in GST mop-up is below both nominal GDP growth and inflation rates, which signals a real-term slowdown,” said Rajeev Khemka, a senior tax economist. He stressed the need for targeted fiscal incentives to reignite demand in key sectors like FMCG and real estate.

On a cumulative basis, GST revenue for the first four months of FY26 has shown a modest 7.8% increase compared to the same period last year. Experts suggest that festive season demand will play a critical role in maintaining momentum for the rest of the year. “August and September numbers will be crucial to gauge consumer recovery,” said Soumya Kanti Ghosh, chief economic adviser at SBI.

Meanwhile, the Centre’s compensation to states and timely settlement of IGST continues to support smoother cash flows. The finance ministry has also reiterated its commitment to reducing litigation and improving taxpayer services through automation and AI-based tools in the coming quarters.

Despite the slower growth, the July collections mark the fifth consecutive month of GST revenue staying above ₹1.6 lakh crore, underlining resilience in the system. Yet, the slower pace calls for vigilance, especially as policymakers balance inflation control with the need to boost demand.

Sources