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Journalism of Courage
At the start of the week, the Government of India released the data for revenue collected through the Goods and Services Tax (GST) in October.
The GST refers to India’s indirect tax regime, introduced in 2017. It is one of the most significant structural reforms that fundamentally altered how indirect taxes were imposed and paid. Before GST, there were several indirect taxes and levies at the central and state level, such as central sales tax, excise duty, value-added tax, and entry tax, etc. The GST replaced all of them.
The official release on Monday (November 3) said GST revenue “soars” in October 2025, which also saw festive spending on account of Diwali. A total of Rs 1,95,936 crores flowed into the government coffers last month — an increase of 4.6% over October last year.
What was more noteworthy, however, was the state-wise distribution.
The official release stated: “It is commendable that several industrial and service-oriented states have reported a significant growth in GST collections compared to October 2024… Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Haryana together contributed over 40% of the total GST revenue, underscoring their role as major consumption and production hubs.”
But a closer inspection of the data showed that as many as 20 states and union territories actually saw their GST revenues contract in October. In fact, since its introduction in 2017, many states have complained about GST revenues, especially when compared to the system before GST.
A recent India-wide analysis of state-level finances by PRS Legislative Research, an independent not-for-profit organisation, shows that total GST revenues continue to be lower than that of the taxes subsumed under GST.
“Since its introduction, aggregate revenue from subsumed taxes of the Centre and states has declined from 6.5% of GDP in 2015-16 (in the pre-GST regime) to 5.5% of GDP in 2023-24,” it states. For perspective, it is noteworthy that in 2020-21, the 15th Finance Commission had estimated a GST-to-GDP ratio of 7% over the medium term.
The inadequacy of overall GST revenues to match the pre-GST level also means several states are now worse off. “In the four years to 2015-16, states got an average of 2.8% of GDP from taxes that were later subsumed under GST… The average SGST (state GST) as a percentage of GDP over the seven years of GST (2.6%) has been below the average subsumed taxes in the four full years before GST,” finds the PRS analysis.
But not all states were affected equally.
While most states saw their revenues decline, some saw them rise — five to be exact. The CHART alongside lays down the changes in those five states as well as the five states that got the biggest hit.
It is the north-eastern states of Mizoram, Nagaland, Sikkim, Meghalaya and Manipur that have seen an improvement in their subsumed tax to GSDP ratios as compared to the pre-GST regime. GSDP refers to the state’s GDP or economic output. In contrast, Punjab, Chhattisgarh, Karnataka, Madhya Pradesh, and Odisha have witnessed the biggest drop in their revenue from the subsumed taxes as a percentage of GSDP.
