GST Collection Hits ₹1.96 Lakh Crore in July, but Net Growth Slows Amid Surge in Refunds

India’s Goods and Services Tax (GST) collections rose 7.5% year-on-year in July to ₹1.96 lakh crore, but net revenue growth slowed to just 1.7% due to a sharp increase in refunds, government data released Friday showed.

Domestic GST collection stood at ₹1.43 lakh crore, registering a modest 6.7% rise. However, with domestic refunds more than doubling up 117% net domestic revenue slipped into a rare year-on-year decline, marking the first such dip since the pandemic.

GST collected in July reflects economic activity during June. Industry watchers link the sluggish net growth to weak urban consumption and muted automobile sales. While the Federation of Automobile Dealers Associations (FADA) reported a 4.84% year-on-year increase in June retail vehicle sales, a sequential drop of 9.44% pulled overall momentum down.

On the external front, import-related GST collections rose 9.7%, and even after export refunds grew 20%, net import GST still posted a healthy 7.5% rise.

Experts interpret the figures as a signal of stabilising, yet uneven, consumption patterns. “Despite global headwinds, GST growth is on a steady path,” said Saurabh Agarwal, Tax Partner, EY India. He highlighted encouraging performance in northeastern states like Sikkim, Nagaland, Meghalaya, and Tripura, indicating a broadening tax base.

High refund volumes are also being attributed to unresolved issues with the inverted duty structure. Vivek Jalan, Partner at Tax Connect Advisory, pointed out that refunds driven by such anomalies hurt GST efficiency. “Products like lithium-ion batteries still suffer from rate mismatches, batteries are taxed at 18%, while their components may be at 28%, leading to higher refunds and revenue leakage,” he said.

Jalan stressed the need for urgent GST rate rationalisation to correct structural inefficiencies. The reduction in net domestic GST indicates a softening of consumption sentiment, and the surge in refunds further accentuates the urgent need for tax reforms, he added.

A bit of a lull at the moment, but analysts believe that India’s overall taxation scenario remains buoyant with hopes of a bounce-back in the months ahead.