Imports drive 23 pc GST surge in Oct as domestic revenue engines lag

GST collections have surged 22.9 per cent year-on-year to Rs 2.31 lakh crore in October, but a closer examination of the numbers reveals emerging challenges beneath the headline growth.

While festive demand and improving compliance have supported revenue mobilisation, import-linked collections are growing substantially faster than domestic revenues, while rising refunds are moderating the growth in net domestic collections.

GST collections stood at Rs 2,31,290 crore against Rs 1,88,125 crore in October 2025. More significantly, net GST revenue, after refunds, crossed Rs 2 lakh crore to reach Rs 2,03,356 crore, registering growth of 25.6 per cent.

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Domestic gross GST collections increased 15.8 per cent to Rs 1,59,044 crore, while import-related GST revenue surged 42.2 per cent to Rs 72,246 crore.

The divergence becomes more pronounced in the cumulative April-October FY27 figures. Domestic gross collections grew just 7.4 per cent to Rs 10.33 lakh crore, compared with 29.3 per cent growth in import-linked collections to Rs 4.44 lakh crore.

The import component accounted for nearly half of the year-on-year increase in October’s gross GST collections, highlighting its growing contribution to India’s indirect tax revenues.

Import surge raises questions on manufacturing dependence

The sharp increase in import-linked collections has emerged as a defining feature of October’s revenue performance.

MS Mani, partner at Deloitte India, points out that IGST collections on imports have exceeded IGST collections on domestic transactions, both during October and in the current financial year. He believes this could indicate continued import dependence in certain manufacturing sectors.

Vivek Jalan, partner at Tax Connect Advisory Services LLP, offers a complementary interpretation, suggesting that higher imports of raw materials and intermediate goods could reflect expanding domestic manufacturing activity and capacity utilisation.

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However, the collection data alone does not establish whether the increase is driven by import volumes, commodity prices or changes in the composition of imported goods.

Saurabh Agarwal, tax partner at EY India, believes the government should consider recalibrating Production Linked Incentive (PLI) schemes in sectors where budget allocations remain underutilised, aligning them more closely with domestic manufacturing objectives and the broader Atmanirbhar Bharat agenda.

Net domestic revenue growth under scrutiny

Beyond the import-led growth, the refund data presents another important dimension of October’s GST performance.

Cumulative GST refunds during April-October FY27 increased 16.9 per cent to Rs 2.08 lakh crore, significantly faster than the 13.2 per cent growth in gross collections.

More importantly, cumulative domestic refunds rose 19.7 per cent, compared with just 7.4 per cent growth in domestic gross collections. Consequently, cumulative net domestic revenue growth was limited to 6 per cent, against 7.4 per cent growth in gross domestic revenue.

Sivakumar Ramjee, Executive Director (Indirect Tax) at Nangia Global, said the divergence between domestic and import-linked GST collections, alongside the faster growth in refunds, warrants closer scrutiny of the underlying revenue trends.

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While cumulative domestic gross collections grew 7.4 per cent during April-October FY27, import-linked revenue surged 29.3 per cent, raising questions about the breadth of domestic tax-base expansion. Equally, cumulative refunds increased 16.9 per cent, outpacing gross revenue growth of 13.2 per cent, with domestic refunds rising 19.7 per cent against 7.4 per cent growth in domestic collections.

Ramjee emphasised that higher refunds are not inherently negative, as they protect export competitiveness and prevent tax cascading, but persistent growth warrants examination of inverted duty structures and refund efficiency. He argued that the policy priority should be to strengthen organic domestic revenue growth while ensuring legitimate refunds are processed swiftly, without locking up businesses’ working capital.

Manoj Mishra, partner and Tax Controversy Management Leader at Grant Thornton Bharat, also highlighted the importance of smoother input tax credit flows and faster refunds in sustaining the benefits of GST reforms.

State-wise performance reveals uneven growth

The state-wise domestic GST collections indicate continued strength across several major economic centres, although the performance remains uneven.

Maharashtra remained the largest contributor, collecting Rs 35,150 crore, up 13 per cent year-on-year. Gujarat recorded 16 per cent growth to Rs 13,516 crore, while Karnataka increased 18 per cent to Rs 15,922 crore. Uttar Pradesh and Bihar both registered 24 per cent growth.

Madhya Pradesh recorded 29 per cent growth, Andhra Pradesh 24 per cent, Haryana 17 per cent and West Bengal 17 per cent.

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Among smaller states, Assam registered 47 per cent growth, Meghalaya 35 per cent, Manipur 40 per cent and Jharkhand 31 per cent.

However, Tamil Nadu’s October growth was limited to 3 per cent, while Himachal Pradesh declined 2 per cent and Sikkim contracted 28 per cent.

Ramjee identified Tamil Nadu’s relatively subdued performance as an area requiring closer examination, particularly its manufacturing and consumption-led revenue trends.

Agarwal believes the stronger performance of several eastern and northeastern states, alongside Rajasthan, Jammu and Kashmir and Madhya Pradesh, reflects a broader geographical spread of economic activity.

GST 2.0 reforms face a sustainability test

Cumulative gross GST collections during April-October FY27 reached Rs 14.78 lakh crore, growing 13.2 per cent over the corresponding period last year. Net collections increased 12.6 per cent to Rs 12.69 lakh crore.

Abhishek Jain, partner and National Head of Indirect Tax at KPMG in India, attributed the sustained growth to economic resilience, improving compliance and the increasing maturity of India's GST framework.

Mahesh Jaising, partner and Leader (Indirect Tax) at Deloitte India, believes the revenue buoyancy, despite the earlier rate rationalisation, provides the GST Council with confidence to continue its reform agenda. He pointed to the 57th GST Council meeting's focus on simplification, faster refunds and smoother input tax credit flows.

Jalan also believes recent measures to liberalise input tax credit provisions and facilitate refunds under inverted duty structures could improve industrial competitiveness, support exports and encourage fresh investment.

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Mani attributed the improving revenue performance partly to stronger GST audits, stricter compliance enforcement and technology-led administration.

The immediate outlook remains positive, with festive-season demand expected to support collections in the coming months. However, the more important test will be whether domestic revenue growth strengthens after the festive season and whether the benefits of GST reforms translate into greater investment and manufacturing competitiveness.

Ultimately, GST performance should not be measured solely by the amount of revenue collected. The real measure of success will be the system’s ability to expand the domestic tax base, facilitate legitimate refunds, reduce compliance friction and generate sustainable revenue without locking up businesses’ working capital.