A Tax Triumph: September’s Record Haul Signals Policy Pivot Paying Off
NEW DELHI – India’s indirect tax engine roared louder in September 2025, with GST mop-ups hitting Rs 1.89 lakh crore – a 9.1% jump from last year and the highest since March’s Rs 2.1 lakh crore peak. The surge, announced by the Finance Ministry on October 1, coincides with the GST Council’s landmark September 22 decision to slash slabs from four to two (5% and 18%), axing the cumbersome 12% and 28% brackets. “This rationalization eases compliance and juices consumption,” declared Revenue Secretary Sanjay Malhotri, as urban spending on durables rose 12% per Nielsen data.
The numbers tell a story of resilience: SGST at Rs 72,000 Cr, CGST at Rs 68,000 Cr, IGST at Rs 1.1 lakh Cr (driven by Rs 25,000 Cr imports). Refunds processed hit Rs 22,000 Cr, up 15%, alleviating exporter woes. On X, #GSTReform exploded with 90K posts, from traders hailing “simpler filings” to economists debating inflation passthrough. Viral clip: A Lucknow shopkeeper’s “28% on ACs gone – sales up 20% already” reel, 10K shares.
Comparisons contextualize: Pre-2017, VAT+excise averaged Rs 1.2 lakh Cr monthly; GST’s 9% CAGR outstrips 7% GDP. Versus peers, India’s 11.4% tax-to-GDP edges Brazil’s 10%, per IMF. “Non-inflationary budget vibes continue,” tweeted Finance Secretary Pandey, linking to fiscal consolidation at 4.9% deficit.
Table of Contents
The Two-Slab Revolution: Scrapping 12% and 28% for a Consumption Boom
Effective October 1, the overhaul merges 5%/12% into 5% for essentials (now 85% of goods) and 12%/18%/28% into 18% for luxuries. Sin goods like tobacco stay at 28%, but most items drop: Washing machines from 18% to 12% effective, cars to 15%. CBIC’s provisional 90% refund for inverted duty structures (IDS) in textiles – claims from Oct 1 – unlocks Rs 10,000 Cr working capital yearly.
Impacts cascade: FMCG giants like HUL project 5-7% volume pop, as household budgets stretch. “Eases Rs 500 Cr annual burden for us,” said a Titan spokesperson on jewelry (down from 18%). Compliance eases too: GSTR-9/9C filing opens for FY24-25 (deadline Dec 31), mandatory over Rs 2/5 Cr turnover. Offline tools for SMEs cut errors 30%, per GSTN.
X reactions split urban-rural: Metro users celebrate “cheaper EVs” (batteries to 5%), while Bihar farmers query agri-exemptions. Poll by ET: 75% of 8K biz owners “thumbs up,” but 20% fear revenue dip. Data backs optimism: Post-July slab tweaks, e-way bills rose 8%, signaling trade revival.
Fiscal Prudence Meets Growth: Moody’s Nod and State Borrowings
Budget 2025’s signals – slowing consolidation to 4.5% deficit – get validation. Moody’s: “Non-inflationary, focuses on capex.” Andhra Pradesh’s Rs 10,000 Cr bond raise (post Rs 8,900 Cr in Sept) exemplifies states’ access, with yields at 7.2%. Nationally, cess/surcharge cap at 10% of gross taxes, per 16th Finance Commission team led by TV Mohandas Pai, shields states from Centre’s 20% share grab.
Comparisons: US sales tax at 7% yields less bang; EU’s VAT averages 21% but stifles SMEs. India’s 1.54% inflation – vs 3% target – gives elbow room. “Boosts manufacturing competitiveness,” per Electricity Act amendments phasing cross-subsidies in 5 years.
Real spaces hum: Mumbai’s Dharavi redevelopment sees GST refunds speed 40%, aiding Rs 20,000 Cr project. X thread on “GST 2.0 winners” (e-com up 15%) hits 12K likes, with users tagging MSMEs.
Challenges and Crystal Ball: Compliance Hurdles, EV Push, and FY26 Outlook
Hiccups persist: Beer industry’s 12-13 Cr can shortage adds 2% logistics costs; IDS claims backlog at Rs 15,000 Cr. Yet, AA framework (1.1 Bn accounts eligible) enables data sharing, cutting KYC time 50%.
For FY26, projections: Rs 22 lakh Cr collections, 10% growth. “Consumption-led recovery,” forecasts Nomura, tying to 9% salary hikes. Borrowers: Optimize via input credits; investors eye GST-linked bonds.
This isn’t tinkering; it’s transformation. As Pandey noted, “Fiscal guardrails for Viksit Bharat.” Consumption’s about to consume doubts.
Key Takeaways
- Record Collections: Rs 1.89 lakh Cr in Sept (+9.1% YoY) fuels capex, with refunds up 15% easing cash flows.
- Slab Simplification: 5% and 18% duo cuts compliance 30%, boosting durables sales 12%.
- Growth Catalyst: Moody’s praises non-inflationary path; expect 10% GST rise in FY26.
Also Read :CBIC’s 90% GST Refund Blitz: Exporters’ ₹15,000 Cr Lifeline in Volatile Trade Winds?