GST Revenue Surge Masks Import Reliance: Domestic Tax Growth Slows to 6.5%
The Goods and Services Tax (GST) completed nine years on July 1, 2026, with June revenues growing 13.9% to ₹1.95 lakh crore—the fastest pace in 13 months. However, this growth was driven largely by imports, while domestic transaction revenues grew only 6.5%, raising concerns about the nation's dependence on foreign goods.
Data released by the government shows that GST from domestic transactions accounted for ₹1.35 lakh crore, or 69% of total collections, down from 74% a year ago. In contrast, import-related GST jumped nearly 35% to ₹6 lakh crore, marking the 16th consecutive month of double-digit growth and the 10th month where import growth outpaced domestic growth.
Tax experts are divided on the reasons. Saurabh Agarwal of EY India suggested that India might be importing goods it could manufacture locally. “The rising share of collections from imports warrants closer structural analysis,” he said, recommending that unutilised funds from Production Linked Incentive (PLI) schemes be redirected to attract high-value manufacturing.
Mahesh Jaising of Deloitte India noted that the import revenue growth likely reflected increased imports of raw materials and intermediate goods, indicating sustained manufacturing activity. However, Pratik Jain of Price Waterhouse & Co pointed to rising prices of imported commodities as a possible factor.
Beyond the revenue figures, experts highlighted several structural issues in the GST framework that remain unresolved after nine years. Jain called for a debate on bringing excluded sectors—real estate, petroleum, liquor, agriculture, and education—under GST. While passenger fuels may not be included soon, he said aviation turbine fuel (ATF) and natural gas are “low-hanging fruit” with minimal revenue implications.
Another persistent problem is the inverted duty structure, where inputs are taxed at higher rates than final products. This forces companies to pay more tax on inputs than they collect on sales, with refunds not always available. The situation worsened after GST rate rationalisation in September 2025.
On compliance, Karthik Mani of BDO India listed industry demands: a single pan-India GST registration to reduce the burden of state-wise filings, and a genuine amnesty for minor reconciliation mismatches to avoid litigation over non-fraudulent errors. Manoj Mishra of Grant Thornton Bharat added that the government has made progress in easing compliance through technology, but more needs to be done to simplify processes.
The data underscores a dual challenge for policymakers: boosting domestic manufacturing while fixing long-standing structural issues in the tax system. As GST enters its tenth year, the focus is on ensuring that revenue growth translates into broader economic self-reliance.
