GST cuts impact Centre’s coffers as fiscal deficit widens on lagging tax collections

While total expenditure in November rose 12 per cent year-on-year to take the total for the first eight months of FY26 to Rs 29.26 lakh crore – or 7 per cent higher from last year – total revenue was 13 per cent lower in November and just 3 per cent higher cumulatively.

As per the Union Budget for FY26, the Centre’s spending estimate for the year is Rs 50.65 lakh crore.

“The issue has been more on the tax front where tax revenue has been lower at 49 per cent of budgeted amount compared with 56 per cent last year. The impact of GST is hence visible here. There would be some reversal especially on the direct taxation front in December when advance tax payments were made especially by corporates. The lower GST collections is also getting reflected in the monthly data released on the tax,” Sabnavis noted.

The impact of the sweeping GST rate cuts that came into effect on September 22 has been visible in the monthly indirect tax data, too. In November – which is reflective of goods and services sold in October – GST collections amounted to Rs 1.7 lakh crore, largely unchanged from Rs 1.69 lakh crore in November 2024. Including compensation cess, which was earlier counted as part of the gross GST mop-up, collections in November were down 4 per cent at Rs 1.75 lakh crore. GST data for December is scheduled to be released on Thursday.

Apart from GST, the customs mop-up was 7 per cent lower in April-November, while the money from excise duties was 9 per cent higher. The Centre’s net tax revenue – which is gross tax collections after adjusting for refunds and transfers to states – was down 14 per cent in November and 3 per cent for April-November. The Budget estimated a 14 per cent growth in net tax revenue from FY25 to Rs 28.37 lakh crore.

On the whole, the Centre’s total receipts, excluding borrowing, have been kept afloat by non-tax revenue, which is up 21 per cent, largely due to the Reserve Bank of India transferring a record dividend of Rs 2.69 lakh crore to the Central government in May 2025. For April-November, non-tax revenues stand at Rs 5.16 lakh crore, not far from the full-year target of Rs 5.83 lakh crore.

On the expenditure front, total spending was up 12 per cent in November and 7 per cent in April-November. While revenue expenditure drove spending in November, capital expenditure was 14 per cent lower in the penultimate month of 2025. For April-November, revenue expenditure – which comprises heads like interest payment and salaries – was up 2 per cent at Rs 22.68 lakh crore, while capex was 28 per cent higher at Rs 6.58 lakh crore.