GST collections soar in May 2025, reflecting robust economic activity

Goods and Services Tax (GST) collections for May 2025 reached ₹2.01 lakh crore, marking a 16.4% year-on-year increase over ₹1.72 lakh crore in May 2024. Underscoring sustained economic momentum and improved tax compliance across the country, growth in GST collections in May, however, represented a slight decline from the record ₹2.37 lakh crore collected in April 2025, but it remains significantly higher than previous years, indicating a consistent upward trend in GST revenues.Key Drivers of GST Revenue Growth
1. Strong Domestic Economic Activity: Domestic transactions contributed approximately ₹1.50 lakh crore to the total GST collections, reflecting a 13.7% increase from the previous year. This growth is attributed to robust consumer demand and increased business activities across various sectors.

1. Surge in Imports: GST revenue from imports rose by 25.2% to ₹51,266 crore, highlighting a significant uptick in cross-border trade and economic integration.

2. Enhanced Tax Compliance and Digital Initiatives: The implementation of e-invoicing and AI-driven fraud detection systems has improved tax reporting and reduced evasion. These measures have led to better matching of input tax credits and more accurate reporting of transactions.4. Sectoral Variations Across States: While states like Maharashtra, West Bengal, Karnataka, and Tamil Nadu reported GST collection increases between 17% and 25%, other large states such as Gujarat, Andhra Pradesh, and Telangana experienced more modest growth of up to 6%. This variation suggests that sector-specific dynamics and seasonal factors play a role in GST revenue generation.
   Refunds and Net Collections
   Despite the growth in gross collections, refunds issued in May 2025 totaled ₹27,210 crore, a 4% decrease from the previous year. After accounting for these refunds, the net GST revenue stood at approximately ₹1.74 lakh crore, reflecting a 20.4% year-on-year increase.
   Experts View
   Meanwhile, experts see the growth as a healthy trend.Abhishek Jain, Indirect Tax Head& Partner, KPMG says “It’s encouraging to see GST collections once again cross the ₹2 lakh crore mark. While last month’s spike was expected with year-end reconciliations, the consistency this month along with a 16 plus percent year-on-year growth points to strong underlying momentum and a recovery that’s clearly taking hold.”Saurabh Agarwal, Tax Partner at EY said, “Looking ahead, we might see similar GST collection numbers with slight increases in June because of ongoing geopolitical tensions across the globe. However, over the mid term, the Indian economy is not expected to be severely impacted by the global economic situation due to atmanirbhar policies of the Indian government.”Pratik Jain, Partner, Price Waterhouse & Co LLP, said, “16% growth in GST collections in the month shows a renewed upward momentum after few months of growth in the range of 11 to 12%. If the growth continues in this range for next couple of months, it might provide the cushion for the Government to look at rate rationalization on which lot of work has already been done.”M S Mani , Partner, Deloitte India, adds, “Compared with the FY25 average gross GST collections of Rs1.84 lac Cr , the figures reported for May25 – which relate to transactions in the first month of FY26 – at Rs.2.01 lac Crores would provide significant fiscal headroom for the government. These figures are also in line with the recent GDP growth estimates, which indicate a robust consumption pattern across months . The GST revenues from imports are 25% higher compared with the same month last year indicates that imports have accelerated despite recent tariff headwinds”“The wide variations in the growth of GST collections across states require a thorough analysis across the sectors that are important in each state . While large states like Maharashtra, West Bengal, Karnataka and Tamil Nadu have reported collection increases of 17% to 25% , similar large states like Gujarat, AP and Telengana have shown increases of only -2% to 6% . Some states like MP, Haryana, Punjab and Rajasthan have shown median increases of 10% . Hence the average growth across the country does not appear to be uniformly reflected across states possibly due to sectoral or seasonal factors which require a deeper data based analysis,” Mani added.The consistent rise in GST collections over the past months indicates a strengthening economic recovery and effective tax administration. As the fiscal year progresses, maintaining this growth trajectory will be crucial for sustaining fiscal health and supporting economic development.
   
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