Goods and Services Tax

GST data signals improved enforcement and compliance. An 8.1% rise in monthly GST collections post GST 2.0 rate rationalisation signals steady economic momentum and improved compliance. The growth reflects a combination of resilient consumption supported by GST rate rationalisation, formalisation of businesses, and better enforcement through technology-driven monitoring.

The sharp increase in e-way bills signals an improvement in overall consumption, driven by rate rationalisation under GST 2.0. This level of growth is uncommon for December and reflects the impact of significant rate cuts.

As GST assessments become increasingly tech-driven, the risk of tax disputes escalating into business disruption is real. Organisations and professionals are recalibrating strategies to navigate this evolving landscape - leveraging technology, strengthening compliance frameworks, and preparing for large-scale dispute management. Proactive compliance and strategic dispute resolution are no longer optional -they’re essential for resilience in today’s GST regime.

While there has been a broad-based increase in supplies at the macro level, it is still too early to predict whether this will translate into higher GST collections, especially after the significant rate cuts. From a broader economic standpoint, the trend points to a pickup in economic activity and supply-side momentum.

The GST compensation cess of all goods other than tobacco and products have been removed from 22 September and the same on the tobacco and products is expected to be discontinued once its purpose, that is, paying off the loans taken to provide compensation support to states is fulfilled.

The proposed Central Excise Bill and the 'Health Security se National Security Cess Bill, 2025' in the Lok Sabha could be in this regard. However, the listed agenda does not specify the industry this may be applied, and hence clarity would emerge once the Bill is introduced in Lok Sabha.

GST collections rose 6.5% in August to ₹1.86 lakh crore, marking the eighth straight month above ₹1.8 lakh crore. Though growth slowed, net revenues jumped nearly 11% after refund adjustments.

Large states led the surge, while Northeast and Andaman & Nicobar showed inclusive gains. Experts say strong domestic demand and stable collections give policymakers confidence to push GST 2.0 reforms.

The clarification by CBIC on GST rules for post-sale discounts will help industry and trade execute such transactions with greater certainty and reduce disputes around what has long been a contentious issue. At the same time, for scenarios involving agreements with end customers for passing on specific benefits to end-consumers through dealers in the supply chain, businesses may need to carefully revisit and evaluate their positions.

The new GST regime, effective from September 22, reduces GST on sub-350 cc motorcycles from 28% to 18%, making mid-capacity bikes cheaper by up to ₹20,000. But motorcycles 350 cc and above now attract a steep 40% GST, raising prices of Royal Enfield, KTM, Triumph, and Harley-Davidson models by up to ₹40,000.

Industry experts call the move a puzzling anomaly. The hike may slow premiumisation, while sub-350 cc models gain traction. Policymakers are treating larger bikes as luxury goods, even though they play a role in tourism, lifestyle, and exports.

GST on namkeens and biscuits reduced from 18% to 5%, making a ₹100 grocery basket nearly ₹11 cheaper. Everyday staples like UHT milk, paneer, pizza bread, rotis and parottas are now tax-free. Shampoo and toothpaste now attract just 5% GST, down from 18%.

Urban families may save 7–8%, rural 5–6%. Once branded the “Gabbar Singh Tax,” GST is now the “Great Savings Tax".

The GST rate rationalisation is a very good move, especially in the current context of US tariffs which have caused stressed in certain sectors and the overall economy. The rate reduction from 12% to 5% and from 28% to 18% is likely to drive comsumption. In addition, consumers are likely to benefit from reduced prices of most goods due to competitive pricing.

The evolving tax and trade regulation dynamics are shaping India's automotive sector. The GST rate reduction has given a real boost to the industry, reflected in stronger sales and improved affordability. The movement of GST rate on parts to the general 18% category has also brought much-needed clarity and uniformity, helping reduce classification disputes and litigation.

The clarifications on post-sale discounts have eased procedural and legal complexities for OEMs and component manufacturers. Invoice Management System (IMS) is another important procedural change that companies now need to gear up for. While uptake under Auto PLI has been limited, other policies have been highly beneficial, including state incentives where component manufacturers can recoup benefits due to intra-state sales, and ECMS benefits for electronics component players.

The regulatory clarity, simplification and targeted incentives continue to drive India's automotive growth story.

As the regulatory and reporting landscape continues to evolve, it's essential for finance leaders to stay ahead of the curve. This quarter, we focused on the global adoption strategies for IFRS 18, SEBI’s enhanced framework on Related Party Transactions, and key tax updates including developments in the Direct Tax Code and GST.

The higher gross GST collections reflect a strong festive season, higher demand and a rate structure that has been well absorbed by businesses. It is a positive indicator of how both consumption and compliance are moving in the right direction.

After the GST rate cuts in September, a large chunk of goods that moved from 12% to 5% have seen input tax credit accumulation on account of higher rate on input services. While they would be able to claim a refund of input tax credit accumulation on inputs, higher credit linked to input services and capital goods pose a significant working capital concern/cost for these businesses.