India’s Goods and Services Tax (GST) revenues experienced a noticeable slowdown in November, the first full month after the implementation of the rationalised GST 2.0 rate structure, signalling possible short-term turbulence for the indirect taxes regime.
According to official data, net GST revenues grew only 1.3% year-on-year to ₹1.52 trillion, reflecting a sharp sequential moderation compared to the strong momentum seen in earlier months of FY 2024–25. The Centre has reported the net figure without including GST Compensation Cess receipts for this month.
Sharp decline in Compensation Cess
Adding to the concerns, GST Compensation Cess collections plunged by 69.06%, dropping to ₹4,006 crore, from nearly ₹13,000 crore in November last year. When the cess component is factored in, the overall GST collections in November were down 4.25% compared to November 2024, marking the biggest month-on-month decline in the ongoing fiscal year.
Transition to GST 2.0 triggers temporary disruption
Senior government officials acknowledged that the dip was expected during the transition period. The rollout of GST 2.0, which restructured slab rates and input credit norms, has led to businesses recalibrating their tax payments and adjusting input tax credit claims.
Officials said that compliance filings were slower than usual in November, with many companies still aligning their accounting systems and tax planning with the new framework.
A finance ministry source noted, “The revenues are likely to stabilise soon. As businesses fully adapt to GST 2.0 and backlog filings come in, we expect a clearer picture in the next two months.”
Revenue pressure raises macroeconomic concerns
Economists caution that the sharp slowdown in tax inflows could tighten fiscal space, particularly at a time when the government is pushing ahead with capital expenditure and social welfare outlays. The Compensation Cess downturn is seen as a significant concern because states rely on the component to offset losses triggered by GST implementation.
Experts also point to weak underlying consumption demand across key sectors—especially consumer durables, real estate and discretionary spending—as a contributing factor to muted GST growth.
Medium-term outlook still positive
Despite the short-term turbulence, policy makers remain optimistic about the new structure. GST 2.0 has been designed to:
- simplify rate slabs,
- reduce cascading tax effects,
- expand the tax base,
- and curb leakages through tighter compliance tracking.
Revenue officials believe that improved digital monitoring mechanisms and higher compliance incentives will begin to reflect in the fiscal numbers once the transition phase stabilises.
What to watch in the coming months
Economists highlight the next two months as crucial to assess whether November’s dip is a temporary adjustment or a sign of deeper demand slowdown. Festive season settlement, year-end business filings, and consumption indicators are expected to shape the next revenue cycle.