India's latest data on goods and services tax (GST) collections was keenly awaited as a signal of the impact of mid-year rate cuts. Gross collections for November stood at ₹1.7 trillion, a drop from October's ₹1.96 trillion, which included revenue from cess.
Compared to November 2024, last month's revenue was up 0.7%. This mop-up is from sales in October, so it captures a period after the GST reset that went into effect on 22 September.
The Centre had hoped that a boom in the offtake of newly tax-relieved products would make up for revenue compression on account of lower rates. Going by the figure released on Monday, the exchequer might not be able to count on that.
It's hard to forecast how demand will respond to price drops in a market like India, where income growth tends to be uneven and precautionary savings high, even though low-income households display a strong propensity to consume. Maybe a better social security framework, as our labour codes aim for, could get people to open their wallets more freely.
But let's not get ahead of ourselves. We need data for at least two more months to draw any conclusion on the effect of GST cuts on government finances.