GST collections have regained buoyancy despite rate rationalisation. Examine the factors behind this and its implications for fiscal consolidation.

The 56th GST Council (September 2025) cut the main slabs to 5% and 18%, with a 40% demerit rate [2]. Even so, gross GST reached ₹2.03 lakh crore in September 2026, up 14.7%, against a base year that had higher rates [1]. Revenue rising faster than rates is real buoyancy, though not all of it is equally durable.

Factors behind the buoyancy

• Volume effect: Lower rates raised demand. Domestic GST grew 10.1% [1].
• Compliance gains: Analysts credit simpler procedures and more GST audits [1]. GSTN analytics and e-invoicing widen the tax base.
• Import surge: Import GST grew 25.9% and reached its highest-ever share of revenue [1]. Part of this reflects higher global prices and a weaker rupee rather than more demand.
• Nominal growth: The Budget assumes ~10% nominal GDP growth for 2026-27 [3]. A tax on value rises with prices.

Implications for fiscal consolidation

Positive

• Deficit target: Steady indirect taxes support the 4.3% fiscal deficit target for FY27 [3].
• Debt anchor: They also support the shift to a debt target of about 50% of GDP by March 2031 [3].
• Quality of spending: Revenue can be raised without cutting capital expenditure.
• State finances: Higher SGST strengthens State budgets, since States cannot easily raise other indirect taxes after GST.

Concerns

• Volatile base: Revenue that depends on imports moves with commodity prices, tariffs and the exchange rate [1].
• Headline vs trend: Growth for April–September was 11.6%, below the monthly figure [1].
• Federal strain: The compensation cess is being withdrawn [4], so States face lower rates without a guaranteed cushion.
• Base effect: Only months where both years have the same rates will confirm structural buoyancy.

The September figures show that rationalisation, combined with better compliance, can widen the tax base rather than shrink revenue. Durable gains need three steps:

• publishing import GST by category of goods;
• an agreed Centre–State plan through the GST Council (Article 279A) for what replaces the cess;
• deepening domestic manufacturing.

With these, GST can serve the "One Nation, One Tax" goal and support fiscal consolidation through cooperative federalism.