India steady amid levy, GST kitty up 6.5% in August

New Delhi: Several high-frequency indicators released on Monday showed the Indian economy remained steady in August, as economists warned of the impact of higher US tariffs that kicked in on August 27.

Goods and service tax (GST) collection rose 6.5% in August from a year earlier, weighed down by a decline in car sales that fell for the fourth successive month, and lower collection from imports.

However, domestic GST collections rose at a robust 9.6% rate and United Payment Interface (UPI) transactions crossed 20 billion in one month for the first time in August, suggesting strong domestic demand.

Manufacturing activity surged to a more than 17-year high, while power consumption rose 4.3% year-on-year in the month, despite lower temperatures this monsoon.

“Economic activity has held steady in the face of global tariff headwinds on account of both improvement in domestic consumption and frontloading of government expenditure,” said Sakshi Gupta, principal economist at HDFC Bank.

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Gross domestic product (GDP) grew a better-than-expected, five-quarter-high 7.8% in the June quarter of this fiscal year, up from 7.4% in the preceding quarter, official data released last week showed.

“Looking ahead, external headwinds, particularly tariff-related uncertainties, remain a key risk to growth,” said Rajani Sinha, chief economist at CareEdge Ratings. The modest GST collection growth could possibly be due to consumers delaying purchases ahead of the proposed recast of the tax and lower collection from imports.

Tax mop-up

“While CGST and SGST recorded a double-digit expansion, the growth in IGST and cess collections was tepid, dampening the headline GST increase to 6.5%,” said Aditi Nayar, chief economist at Icra. “Low inflation readings for WPI and CPI may partly be dampening the GST growth.”

According to auto industry estimates, as many as 330,000 vehicles were dispatched from factories to dealerships last month, a decline of about 7% from 356,000 units in the same period last year.

The total GST collection in August was Rs 1.96 lakh crore, down marginally from Rs 1.96 lakh crore in July and up 6.5% from a year earlier, only slightly more than the 50-month low 6.2% rise in June this year.

The average GST collection in the first five months of FY26 was Rs 2.01 lakh crore, compared with Rs 1.83 lakh crore in the corresponding period last year.

The GST Council will meet later this week to discuss rate rationalisation and reduction in the number of tax slabs.

Gross domestic GST revenue grew by 9.6% year-on-year to Rs 1.4 lakh crore in August, while that from the levy on imports fell 1.2% to Rs 49,354 crore. GST refunds declined by 19.9% to Rs 19,359 crore. Net GST revenue rose by 10.7% to Rs 1.67 lakh crore in August.

State-wise figures show a mixed trend.

“The growth in state revenues amongst large producing and consuming states has been very low — 2% (Delhi), 3% (Gujarat), 4% (Rajasthan), 6% (Maharashtra), 7% (Karnataka) and 8% (Tamil Nadu),” said MS Mani, partner, Deloitte India.

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