The goods and services tax collection crossing ₹2 lakh crore in May came in as a surprise. It’s only the third time the gross monthly GST revenues have crossed the mark, that too at a time of immense economic uncertainty. The May high flows from transactions carried out in April, the month when Donald Trump triggered a major upheaval in global trade with his wavering ‘reciprocal’ tariff announcements. The latest figures show that despite the heightened uncertainty, domestic economic activities remained buoyant. Even trade picked up, as shown by a 25 percent growth in revenue from imports. The double-digit growth in GST is an indication of not just stronger economic activity, but also of a maturing tax system in which compliances are less burdensome and tax leakages fewer.
The total collection in May rose 16.5 percent, with revenues from domestic transactions growing by 14 percent to ₹1.5 lakh crore, while revenues from imports increased by a quarter to ₹51,000 crore. The net GST revenues, after deducting refunds from the gross collection, showed even better buoyancy as it increased by 20.4 percent to ₹1.74 lakh crore. The fact that the gross revenues in the first two months of the current financial year witnessed double-digit growth is significant, as collections in 2024-25 had shown a worrying trend of fatigue. Revenue growth in 2024-25 failed to cross the double-digit mark as the gross collection increased by only 9.4 percent.
If this monthly trend continues—as some have explained it should—the GST Council could be encouraged to bite the bullet on rate rationalisation, a long overdue reform in the indirect tax system. Rationalisation is not necessarily an exercise only in lowering tax rates on specific items, but also of removing anomalies like inverted duty structures and bringing down the number of rate slabs. Currently, there are five GST rates, adding to the compliance burden and leading to a mountain of litigation. Fewer rates should be the glide path the council should adopt. A matured tax system should not wear out taxpayers with onerous compliances, lengthy litigations and punishing rates. With sustained efforts of the government and the GST Council, the indirect tax system has evolved for the better over the past 8 years. Now is the time to iron out the creases that remain.
Source from: https://www.newindianexpress.com/editorials/2025/Jun/03/gst-collection-high-a-result-of-maturing-system
