GST Collection Rises by 16.4% in May 2025

GST Collection Rises by 16.4% in May 2025 

Why in News? 

The GST (Goods and Services Tax) Network recently released the collection figures for May 2025. For the second straight month, GST collection topped ₹2 lakh crore. A record of ₹2.37 lakh crore was set in April. In May, collections increased by 16.4% to ₹2.01 lakh crore. 

GST Collection Rises by 16.4% in May 2025

• • GST Collection: 
    • The Goods and Services Tax (GST) collection for May 2025 was ₹2.01 lakh crore. This is slightly less than the ₹2.36 lakh crore collected in April 2025, but it represents a significant 16.4% increase compared to May 2024.

• Various Taxes:

• Central GST (CGST): ₹35,434 crore
• State GST (SGST): ₹43,902 crore
• Integrated GST (IGST): ₹1,08,836 crore
• Cess: ₹12,879 crore

• Domestic and Import Transactions: 
  • GST collection from domestic transactions in May 2025 saw an annual increase of 13.7%. Conversely, GST from imports surged by 25.2%.
• Refunds: 
  • The net GST collection, which is the amount after refunds, stood at ₹1.74 lakh crore. This indicates an annual growth of 20.4%. This month saw a record ₹27,210 crore in refunds issued, which included:

• CGST: ₹4,243 crore
• SGST: ₹5,391 crore
• IGST: ₹17,159 crore
• Cess: ₹417 crore

• State-wise: 
  • Most states recorded an increase in GST collection this month. States like Maharashtra, Karnataka, Tamil Nadu, and West Bengal saw an increase of 17% to 25%. 
  • Large states such as Gujarat, Andhra Pradesh, and Telangana recorded an increase of only up to 6%. States like Madhya Pradesh, Haryana, Punjab, and Rajasthan saw a moderate increase of 10%.
  • However, some states reported a decrease in GST collection:

• Uttarakhand: –13%
• Mizoram: –26%
• Dadra Nagar Haveli and Daman & Diu: –6%
• Andhra Pradesh: –2%

What is Goods and Services Tax (GST) Collection?

• • Introduction: 
    • GST collection refers to the total amount of tax collected by the central and state governments on goods and services. 
    • It includes various central, state taxes, and cesses. 
    • This collection is paid to the government by sellers, producers, and service providers across the country. 
    • In this process, businesses file details of their monthly sales and purchases on the portal, and the tax amount is paid based on this information.
    • Goods and Services Tax (GST) collection is a key indicator of a country’s economic strength and the efficiency of its revenue system. It serves as a source of government income. 
    • It also helps in estimating the country’s consumer demand, business activities, and tax compliance.

• Categories:

• CGST: Tax received by the central government, levied on supplies within states.
• SGST: Tax received by the states, levied on supplies within the same state’s boundaries.
• IGST: Tax levied on inter-state supplies or imports from abroad, collected by the center and then distributed among states.
• Cess: An additional tax on specific goods (e.g., luxury cars, tobacco), used for compensation.
  • The combined form of these categories is called GST collection.

• Mechanism: 
  • The GST collection process is primarily managed through the GST Network (GSTN). 
  • Every registered business is required to file a monthly return. 
  • This return includes details of their total sales, invoices, and taxable transactions. 
  • The GST portal automatically processes this data and determines the tax liability. Businesses pay the GST amount online before the specified due date.

Key Reasons for High GST Collection in May 2025

• Resurgence in Domestic Consumption: A major factor behind the increase in GST collection in May 2025 was the rising purchasing power of consumers. The increasing use of digital transactions in rural areas also boosted business activities. Additionally, the increase in income in the agricultural sector strongly supported domestic demand, leading to increased market purchases.
• Increase in Production Capacity: During this period, various production sectors in the country, such as industrial manufacturing, steel, cement, vehicle manufacturing, and consumer goods, showed continuous rapid growth. The number of orders, raw material purchases, and the activity of the delivery chain in these sectors were seen to be higher than before. 
• Policy Reforms: The government equipped the tax monitoring system with digital tools, making administration more efficient. An AI-based risk assessment system was actively implemented to curb fake bills and tax evasion. Automatic matching of GSTR-1 and GSTR-3B data, along with an alert system, immediately detected irregular transactions.

Importance of GST Collection in India

• Major Basis of Revenue: GST is the largest source of tax revenue for the central government. After income tax and corporate tax, the revenue from GST plays a decisive role in fulfilling the government’s daily and capital expenditures. Stable and reliable revenue sources are needed for investment in sectors like defense and digital technology, which GST fulfills.
• Financial Autonomy of States: A large portion of GST collection is transferred to states as their share, enabling them to run their independent plans and welfare programs. The tax received by states as SGST not only provides them with fiscal stability but also frees them from dependence on the center.
• Financial Basis for Public Welfare Schemes: The funds required to run public welfare schemes like health insurance (Ayushman Bharat), free ration scheme, DBT (Direct Benefit Transfer) for farmers, and old-age pensions primarily come from indirect taxes like GST. When collections are stable and high, the government is able to expand schemes, increase the number of beneficiaries, and introduce new policies.
• Unity of Federal Structure: The GST system has bound India into the concept of ‘One Nation, One Tax, One Market’. Through this, the central and state governments collaboratively manage taxes on a shared platform, which further strengthens India’s constitutional federalism in practice.