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India's GST Growth Signals Formal Economy Strength, Experts Highlight Momentum

India's GST collections grew 6.1% year-on-year in December 2025, reaching ₹1.74 lakh crore, signaling robust economic activity. Experts note that sustained momentum could achieve around 9% annual growth, reinforcing the structural strength of the formal economy. The 19.7% rise in import-related IGST points to resilient supply chains and manufacturing, while increased refunds support business liquidity. As Budget 2026-27 approaches, calls grow for GST 2.0 reforms focusing on automation, reduced litigation, and a calibrated credit framework.

Key Points: GST Growth Reflects India's Formal Economy Strength: Experts

  • 6.1% GST growth in December
  • Import-related IGST up 19.7%
  • Refunds surge 30.9% aiding liquidity
  • Policy focus on GST 2.0 reforms
2 min read

GST growth reinforces structural strength of India's formal economy: Experts

December GST collections rose 6.1%, reinforcing India's economic resilience. Experts see potential for 9% YoY growth and highlight structural strength.

GST growth reinforces structural strength of India's formal economy: Experts
"December GST numbers reinforce the structural strength of India's formal economy. – Manoj Mishra, Grant Thornton Bharat"

New Delhi, Jan 1

Despite the steep cut in GST rates, a growth of over 6 per cent in gross monthly collection in December is encouraging, industry experts said on Thursday.

India's GST (goods and services tax) collection recorded a 6.1 per cent increase to Rs 1,74,550 crore in December 2025 compared to Rs 1,64,556 crore the same month of the previous year, reflecting the increase in economic activity during the month.

"If this momentum continues for the remaining months of this fiscal, the YoY growth of around 9 per cent is still possible, which seems to be the target government might also be looking at," said Pratik Jain, partner, Price Waterhouse & Co LLP.

Central GST collections in December rose to Rs 34,289 crore, state GST collections to Rs 41,368 crore, and integrated GST collections to Rs 98,894 crore.

According to Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, December GST numbers reinforce the structural strength of India's formal economy -- an encouraging signal as India consolidates its position as the world's 4th largest economy, surpassing Japan.

"The composition of collections is equally telling with import-related IGST growth of 19.7 per cent points to resilient supply chains and manufacturing momentum, while steady domestic collections reflect stable consumption," he mentioned.

The standout metric remains refunds at Rs 28,980 crore, up 30.9 per cent YoY, underscoring the system's growing emphasis on business liquidity, even as export refunds saw only a marginal 1.9 per cent dip amid global trade softness.

Strong contributions from Maharashtra, Gujarat, Karnataka and Haryana continue to anchor revenues.

The government raised Rs 4,551 crore via the GST compensation cess, which is continuing only as a transitory arrangement till the entire loan and interest liability are settled. The full-year collection was Rs 88,385 crore, compared to Rs 1.1 lakh crore in 2024.

"As Budget 2026-27 approaches, these trends strengthen the case for policy focus on building on the GST 2.0 reforms focusing on end-to-end automation of compliances, reduction of unwarranted litigation and calibrated credit framework to sustain growth without compromising revenue certainty," said Mishra.

- IANS

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Reader Comments

P
Priya S
Good to see the formal economy growing. But as a small business owner, I still find the compliance process quite complex and time-consuming. The experts are right - we need GST 2.0 with more automation to help smaller players.
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Rohit P
Maharashtra, Gujarat, Karnataka, Haryana... the usual suspects leading the charge. While it's great, I hope policies can also boost economic activity in the eastern and northeastern states to create a more balanced growth story for the entire country.
S
Sarah B
The 30.9% increase in refunds is a very positive signal. It shows the system is working to improve liquidity for businesses. In the current global scenario, this kind of support is crucial for sustaining growth and competitiveness.
M
Manoj Q
Solid numbers. The fact that we're seeing this growth while being the 4th largest economy is impressive. It reflects well on our structural reforms. Now, the focus should indeed be on simplifying the system further to reduce compliance burden.
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Nisha Z
I appreciate the detailed breakdown. The steady domestic collections point to stable consumption, which is the backbone of any economy. Hope this translates to more job creation and better income growth for the common person.

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