GST rate cut adversely impacts TG’s tax mop-up

After the rate rationalization came into effect, the total GST collections in the state in September reached Rs 4,998 crore and it was Rs 5,726 crore during the festival season in October. Before the rate rationalization, the GST revenue in August this year was Rs 5,103 crore

Hyderabad: The Telangana state seems to be experiencing the adverse impact of rate rationalization of Goods and Services Tax (GST). Even though the state registered one per cent growth in GST collections in November, when compared to the same month last year, the tax collections were reduced due to rate rationalization. Last month, the total GST collection stood at Rs 3,910 crore, slightly higher than Rs 3,880 crore registered in November 2024, but a lot lower than expectations.

Official sources said that the GST collections in November were relatively low when compared to the indirect tax mop-up in the last four months. In September this year, the Central government rationalized GST by reducing tax-slabs from four to two. Under the two-slab system, GST rates of 5 per cent and 18 per cent came into force from September 22. Additionally, new tax rate of 40 per cent was imposed on luxury and sin goods.

After the rate rationalization came into effect, the total GST collections in September reached Rs 4,998 crore and it was Rs 5,726 crore during the festival season in October. Before the rate rationalization, the GST revenue in August this year was Rs 5,103 crore.

First time after the implementation of the new indirect tax rates dubbed as GST 2.O, the officials said the GST revenues came down significantly in November. The State Commercial Taxes Department is analyzing the revenue collections to seek compensation from the Union government for losing state share in the reduced GST collections.

The officials said that the GST revenue from the automobile sector was reduced after slashing the tax rates. Though the automobile sector registered steady growth in the sales in the state, GST collections from the sale of automobiles came down and the reasons for the fall will be known only after compilation of details of the sales. Indirect taxes on small cars, two wheelers, tractors and buses were reduced in the GST 2.O regime. Reduced GST rate on apparels and electronics also has an impact on GST revenues in the state.