GST cut impact: Fiscal deficit widens on lagging tax collections, Pg4

Key Highlights:

• India's fiscal deficit reached 62.3% of the full-year target in the first eight months of 2025-26, a 10% increase year-on-year.
• The government aims for a fiscal deficit of Rs 15.69 lakh crore, or 4.4% of GDP, for the current fiscal year.
• GST collections in November amounted to Rs 1.7 lakh crore, nearly the same as the Rs 1.69 lakh crore collected in November 2024.
• The RBI transferred a record dividend of Rs 2.69 lakh crore to the central government in May 2025, boosting non-tax revenue.

Detailed Insights:

• The widening fiscal deficit is attributed to lagging tax revenue, particularly due to the impact of GST rate cuts implemented on September 22, 2025.
• Total expenditure in November increased by 12% year-on-year, while total revenue decreased by 13%, impacting the government's fiscal balance.
• The Centre's net tax revenue decreased by 14% in November and 3% for April-November, falling short of the budgeted 14% growth.
• Non-tax revenue, boosted by the RBI's dividend, has helped offset some of the shortfall in tax revenue, reaching Rs 5.16 lakh crore against a full-year target of Rs 5.83 lakh crore.
• Lower GST collection is reflected in the monthly data, impacting the overall tax revenue and contributing to the widening fiscal deficit.

Key Concepts Involved:

• Fiscal Deficit: The difference between a government's total expenditure and its total revenue.
• GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services.
• Tax Revenue: Income that governments receive from taxes, which include individual income tax, corporate income tax, and taxes on goods and services.