​Unwelcome surge: On the buoyancy in GST collections

India’s June GST collections rose 13.9% year-on-year to ₹1.95 lakh crore, driven largely by import IGST, which surged 34.6% compared with June 2025, up from 17.2% growth in May. Domestic GST collections grew by a more modest 6.5%, suggesting that the sharp increase in overall collections owes less to a broad-based improvement in domestic value addition. Some economists have argued that this reflects stronger imports of capital goods and industrial inputs. However, May petroleum products’ trade data and Q1 FY27 data on the performance of the eight core industries, point to a rather different explanation. June GST collections reflect economic activity during May. While crude and petroleum products constituted a 54% rise this May (YoY) in merchandise imports by value, the other chunk was gold, which constituted another 34% rise. The surge in gold price, by nearly 60% between last May and this May, suggests hedging during difficult times, rather than broad-based economic activity. To stem gold imports, the government hiked its import duty from 6% to 15% on May 13, which likely added to the May import GST kitty. This period also coincided with the rupee depreciating by almost 6% against the U.S. dollar since late February. This coupled with a spike in freight charges, and a 14.5% rise on non-oil imports in May at elevated global prices mechanically raised the June tax base. This suggests that much of the import GST rise is driven by imported inflation and currency depreciation rather than domestic production growth, indicating an unwelcome increase due to higher prices.