In a sign of temporary adjustment pressures following the implementation of the GST 2.0 rate rationalisation, as many as 20 out of 36 States and Union Territories (UTs) recorded a contraction in their GST collections for October 2025, marking the weakest monthly performance so far in the current financial year (FY26).
GST Growth Moderates Sharply to 4.6% in October
According to official data, gross GST revenue rose by just 4.6% year-on-year in October, while State GST collections grew a modest 2%, indicating a broad-based moderation after several months of robust growth. In contrast, GST revenues had surged by over 13% in May, reflecting strong consumption and industrial activity earlier in the year.
Several major states reported a decline in their monthly inflows. Himachal Pradesh (-17%), Jharkhand (-15%), Uttarakhand (-13%), Andhra Pradesh (-9%), Madhya Pradesh (-5%), Rajasthan (-3%) and Delhi (-1%) were among those showing the steepest year-on-year falls.
Even large contributors such as Haryana (0%), Maharashtra (3%), Tamil Nadu (4%) and Gujarat (6%) posted muted growth, far below the double-digit increases seen earlier in April and May. However, Karnataka and Telangana rebounded with 10% growth each, reversing the softness observed in September.
Impact of GST 2.0 Rate Reforms on October Collections
Officials attributed the slowdown to the timing and transition effects of the new GST 2.0 rate structure, which came into effect on September 22, 2025, following Prime Minister Narendra Modi's Independence Day announcement of a simplified tax framework.
Since GST collections reflect economic activity from the previous month, October inflows largely captured the post-rate-cut adjustment phase, when many businesses delayed invoicing and dispatches in early September to pass on lower tax rates to customers.
A senior state government official noted that it was "too early to draw conclusions from one month's data."
"In September, only the last eight days reflected the new rates. Before that, many businesses held back sales in anticipation of the cuts," the official said. "We should wait for the November numbers to assess whether this moderation persists. Growth is expected to rebound with festive demand."
Experts Cite Deferred Demand and Transition Adjustments
Tax experts echoed the view that the GST 2.0 transition temporarily distorted monthly trends.
"Many sectors, especially automobiles and other high-value goods, saw deferred purchases in the first half of September in anticipation of rate cuts. Only the last few days of the month captured post-cut demand, making October appear softer," said one indirect tax expert.
Another analyst added that sector-wise GST data would help policymakers better understand these fluctuations.
"Without granular data, it's difficult to pinpoint which sectors drove the slowdown. Sectoral insights would improve fiscal planning and help states respond more effectively," he said.
Currently, the GSTN does not publish detailed sectoral collection figures.
North-Eastern States and Service Hubs Showed Resilience
Despite the nationwide moderation, some regions bucked the trend. Arunachal Pradesh (44%), Nagaland (46%), Ladakh (39%), Andaman & Nicobar Islands (30%) and Dadra & Nagar Haveli & Daman & Diu (10%) posted robust year-on-year growth.
Meanwhile, India's key service-sector states - Maharashtra, Karnataka, Tamil Nadu, Telangana and Haryana - managed to avoid contraction, supported by stable IT and professional services activity, even as manufacturing-heavy regions saw sharper slowdowns.
Outlook: Cautious Optimism Ahead of Festive Season
Economists expect GST collections to recover in November and December, driven by festive sales, improved consumption sentiment, and the gradual normalisation of invoicing under the GST 2.0 regime.
While the October dip has raised short-term concerns, policymakers remain confident that structural reforms, digital monitoring, and compliance tightening will sustain healthy revenue growth through the remainder of FY26.
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