India’s GST collections cross $24 billion in May: What it signals before RBI policy review

India’s Goods and Services Tax (GST) collections remained above the ₹2 lakh crore mark (approx. $24.1 billion) for the second consecutive month in May 2025, registering a robust 16.4 per cent year-on-year growth.

The latest data, released by the Ministry of Finance, comes just days before the Reserve Bank of India (RBI) convenes for its bi-monthly Monetary Policy Committee (MPC) meeting on 4 June.

The total GST revenue stood at ₹2.01 lakh crore ($24.1 billion) in May, compared to ₹1.72 lakh crore ($20.6 billion) in May 2024.

This follows a record ₹2.37 lakh crore ($28.4 billion) collection in April 2025. Net revenue after refunds amounted to ₹1.74 lakh crore ($20.8 billion), a sharp 20.4 per cent rise from the ₹1.44 lakh crore ($17.2 billion) collected in May last year.

Import-led growth raises questions on consumption patterns

The growth was driven largely by import-related taxes. GST revenue from imports rose 25.2 per cent to ₹51,266 crore ($6.2 billion), while domestic transactions contributed ₹1.50 lakh crore ($18 billion)—up 13.7 per cent from the previous year.

Total refunds issued declined 4 per cent to ₹27,210 crore ($3.26 billion).

“The 16 per cent growth in GST collections in the month shows a renewed upward momentum after a few months of growth in the range of 11–12 per cent,” Pratik Jain, Partner at Price Waterhouse & Co LLP, told PTI.

“If this growth sustains over the next few months, it might provide a cushion for the government to consider rate rationalisation, on which significant groundwork has already been done,” he added.

However, experts warn that the growth pattern is not uniform across India. States like Maharashtra, West Bengal, Karnataka, and Tamil Nadu posted strong collection growth of 17–25 per cent, while states such as Gujarat and Telangana lagged with growth below 6 per cent, according to M S Mani, Partner at Deloitte India, quoted by PTI.

“The average growth across the country does not appear to be uniformly reflected across states, possibly due to sectoral or seasonal factors which require deeper, data-based analysis,” Mani said.

Domestic demand lags, import surge continues

Several tax analysts believe the growth is being powered by imports rather than domestic consumption. Vivek Jalan, Partner at Tax Connect Advisory Services LLP, told PTIthat while import-related GST rose nearly 73 per cent, domestic revenue growth was modest in comparison.

“This, coupled with the fact that export refunds are not growing correspondingly, reflects the fact that import growth far exceeds export growth,” Jalan explained.

EY India’s Saurabh Agarwal also told PTIthat similar numbers could be seen in June owing to ongoing geopolitical developments impacting global trade flows.

RBI to weigh strong GST data and soft inflation in June MPC meeting

The strong GST collections—an indicator of sustained economic activity—arrive just as the Reserve Bank of India prepares for its rate-setting Monetary Policy Committee (MPC) meeting, scheduled from 4–6 June.

Economists widely expect the six-member panel to deliver a 25-basis point rate cut, reducing the repo rate from 6 per cent to 5.75 per cent, in what could be the third consecutive rate cut in 2025.

The move is backed by a steep fall in inflation. India’s consumer price index (CPI) dropped to 3.2 per cent in April, the lowest in nearly five years. This aligns well within the RBI’s flexible inflation targeting framework of 4 per cent ± 2 per cent.

According to the RBI’s annual report, “The benign inflation outlook and moderate growth warrant monetary policy to be growth supportive, while remaining watchful about rapidly evolving global macroeconomic conditions.”

Market participants and lenders are also anticipating a total of 50 basis points in rate cuts for FY26, which would help lower external benchmark lending rates (EBLR) and reduce borrowing costs for home, auto and personal loans.

As GST revenues remain strong and inflation eases, the central bank may find ample headroom to support India’s growth trajectory through accommodative monetary policy.