India’s domestic economy is experiencing a “genuine demand expansion”, which was the intent of the GST rate rationalisation carried out in September 2025, government sources said on June 1.
As per an internal note, goods sector taxable supply (goods sold that were taxed) grew 26.9% year-on-year in April 2026, reflected in May GST collections, with positive growth recorded across all 27 commodity groups, “confirming the breadth and durability of domestic demand”.
“Taxable supply is a good proxy for consumption in the economy. This growth is not concentrated in any single segment but spans agriculture, manufacturing, chemicals, metals, electronics, and consumer goods simultaneously,” said the internal note.
The note comes in the backdrop of GST data, released earlier today, which showed that India’s gross GST collections rose merely 3.2 percent year-on-year to Rs 1.94 lakh crore in May 2026. In April 2026, the total mop-up stood at a record-high of Rs 2.43 lakh crore.
As per government sources, the 3.2 percent growth was due to a high-base-effect, as in May 2025, Rs 10,000 crore additional revenue came in as one-time payment made by a telecom operator for spectrum allocation. Barring this figure, the adjusted growth in gross mop-up is 9 percent.
Meanwhile, as per the GST data, gross collections from imports surged 19.1 percent on-year to Rs 59,654 crore in May. But collections from domestic transactions fell 2.6 percent to Rs 1.35 lakh crore.
The net GST mop-up in May increased 3.3 percent on year to Rs 1.67 lakh crore, and in April-May by 5.5 percent to Rs 3.77 lakh crore.
Government sources, however, say that collections are healthy and demand is robust. As per the internal note, services sector, continues to demonstrate strong and broad-based momentum in April 2026, with total taxable supply growing 22.2 percent year-on-year.
“The breadth and consistency of services growth is particularly significant because services GST is less cyclical and stickier, providing a stable and growing foundation for the overall revenue stream. The strong showing in real estate, construction, and transport further corroborates the investment and consumption narrative,” said the internal note.
IGST witness expansion
Integrated GST on imports has grown by a robust 20.2 percent in May 2026, rising from Rs 50,070 crore (in May 2025) to Rs 59,654 crore reflecting a strong momentum in the last few months. This is the standout performer in the revenue mix. The bulk of this import growth is driven by raw materials and intermediate inputs that feed India’s industrial production chain, said officials.
For instance, in May, processing units recorded 387 percent year-on-year IGST growth, and memory chips recorded 205 percent. “This reflects sustained domestic investment in electronics, IT, and telecom manufacturing,” said the internal note.
There was a 66% rise in lithium-ion battery imports, which underlines India’s deepening integration into the EV and grid storage ecosystem, said the note.
Coal alone accounted for 8.1 percent of incremental IGST, with collections rising 391 percent on year, reflecting the heightened fuel and coking coal requirements of steel plants, cement kilns, and thermal power generation, it added.
Imports of intermediary goods/raw materials are a leading indicator of demand for manufacturing activity. One way of looking at this is that a strong import IGST number therefore signals that India’s industrial order pipeline remains healthy and that domestic manufacturing capacity is being actively deployed, said the sources. “It also reflects confidence among businesses in sustained domestic demand conditions.”
“The resilience in import-linked revenues has helped overall net GST collections in April-May grow by 5.5% year-on-year, underscoring the strength of India’s external trade flows,” an tax expert said.
Experts’ take
“Imports as well as domestic consumption of products and services have expanded significantly, which shows our economic resilience. Given the increase in input costs due to supply chain issues, this might be a right time for government to consider providing working capital support to industry by relaxing refund provisions with respect to input GST, which has been accumulating for many businesses,” another tax expert said.
It’s significant that collections have remained close to the Rs 2 lakh crore mark even without any extraordinary revenue support this year, underscoring the growing maturity and stability of GST regime, said.
Source from: https://www.moneycontrol.com/news/business/gst-may-collections-up-3-2-at-rs-1-94-lakh-crore-13937327.html
