Goods and services tax collections are a good barometer of the Indian economy. It is also the foundation of the government’s capital expenditure. No wonder then that November’s GST collections created concern as it slowed to a year’s low of Rs 1.7 lakh crore, down from Rs 1.96 lakh crore the previous month. Year-on-year, too, the growth rate of 0.7 percent was the slowest since the pandemic.
This was expected after the Union government’s consumer-friendly reforms in September shrank the GST levy on common goods to two slabs of 5 percent and 18 percent. Meanwhile, conscious of eroding revenue and the end of the GST compensation cess next year on ‘sin’ products like tobacco and pan masala, the government has rushed two Bills in the Lok Sabha to ensure tax income from these products remains unchanged.
To put it in context, the overall GST picture remains robust. Collections have tripled since the tax was first implemented in 2017. Last fiscal recorded the highest-ever gross GST collections at Rs 22.08 lakh crore, a 9.4 percent increase over the previous year. Even the October 2025 collection was 4.6 percent higher than the same month a year ago. This reflects stricter compliance and a rapid increase of registered taxpayers from 65 lakh in 2017 to over 1.51 crore now.
November must be seen as a temporary blip caused by the economy adjusting to the new baseline rates. The move to reform the onerous GST slabs came not a day too soon. Sales across several large segments like cars and consumer goods rose because of the concessions. After all, taxation is not an end in itself. A rollback that improves sales and consumers’ living standards is justified.
On the other hand, coming down hard on sin products like tobacco will continue to be subject to debate. Most nations have used the policy tool for raising revenue, knowing well the somewhat inflexible demand on the users’ side. At present, tobacco products are taxed at 28 percent, with the compensation cess taking the effective rate to anything between 40 and 290 percent. If taxation is indeed to be used to coax habits away from unhealthy products, there needs to be another debate—on the GST rates for ultra-processed foods, whose consumption the government repeatedly warns us to moderate or avoid.