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Informist, Friday, Dec. 19, 2025

NEW DELHI – The fiscal impact of the goods and services tax changes rolled out in September was around INR 240 billion in November, with the Centre bearing a "modest" fiscal impact of INR 140 billion-INR 150 billion, according to Nomura. Despite the mild fiscal cost, lower GST proceeds come on the back of a revenue shortfall led by lower nominal GDP growth, personal income tax cuts and trailing disinvestment proceeds, thereby complicating the fiscal math.

"We expect the government to meet its FY26 (2025-26 (Apr-Mar)) fiscal deficit target of 4.4% of GDP, but it will require expenditure consolidation in the coming months," according to the report. 

GST collections in November fell on a year-on-year basis for the first time in over six years. The government collected INR 1.75 trillion in November, down 4.0% on year, Informist's calculation of government data showed. The last time GST collections fell on year was in August 2020. Excluding cess collections, GST revenue rose 0.7% on year to INR 1.70 trillion in November, data showed. The government collected INR 47.56 billion as cess in November, lower than INR 132.53 billion a year ago. 

This came after the GST Council in September lowered taxes on several goods and reduced the tax slabs to two--5% and 18%--from four earlier. The estimate of revenue loss is based on the 'raw' data for November and the extrapolation of sequential momentum trends had the GST rate cuts not happened, the economists at Nomura said. "The GST data in the coming months will further help fine-tune our estimates," they said. 

Fiscal pressures are already significant this year, with most key tax collections trailing the budgeted growth rates. On the expenditure side, front-loaded capital expenditure has led to a sharp overshoot of the budgeted growth rate, but the government has kept revevnue expenditure in check.

"Despite slower revenues and higher expenditure, we believe the government's commitment to its fiscal deficit target is a credible one," Nomura said. "Hence, while our estimates show a potential revenue undershoot of ~INR1.3trn in FY26 (0.37% of GDP) relative to budget estimates, we expect this to be covered by expenditure compression in H2 FY26," it said. 

The government's fiscal deficit rose 10% on year to INR 8.25 trillion in Apr-Oct, accounting for 52.6% of the Budget estimate for FY26. Total expenditure during the same period rose 6.1% while total receipts rose 4.5%. The government has projected fiscal deficit at 4.4% of GDP in FY26, marking the last leg of fiscal consolidation.  End

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

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