GST at 9 — Revenues up 14% in June 2026 but dependence on imports increased, domestic sales lagged

New Delhi, India Jul 1, 2026 ALN: The Goods and Services Tax (GST) has been a pivotal reform in India's tax structure since its implementation on July 1, 2017. As of June 2026, the GST revenue has shown a significant growth of 13.9%, reaching ₹1.95 lakh crore, which is the highest growth rate recorded in the past 13 months. This growth, however, comes with a caveat: a substantial portion of the revenue increase is attributed to imports, while domestic sales have lagged behind.

In the wake of GST's nine-year anniversary, tax professionals and experts have pointed out several persistent challenges that continue to plague the system. These challenges include issues related to input tax credits, dispute resolution mechanisms, the need for multiple registrations across states, and the problematic inverted duty structure. While these issues are acknowledged, experts also recognize that the GST system has shown signs of steady improvement over the years, suggesting that it is evolving to better meet the needs of the economy.

Rising Import Reliance

The data for June 2026 reveals that GST revenue generated from domestic transactions rose by only 6.5%, amounting to approximately ₹1.35 lakh crore. This figure represents 69% of the total GST revenue for that month, a decline from the 74% share recorded in June of the previous year. This shift indicates a growing reliance on imports for GST revenue, which raises concerns about the health of domestic manufacturing and sales.

In stark contrast, revenue from imports surged nearly 35% in June 2026, reaching ₹6 lakh crore. This marks the 16th consecutive month of double-digit growth in GST revenue from imports and the 10th month where this growth has consistently outpaced that of domestic transaction revenues. The implications of this trend are significant, as it suggests a potential imbalance in the economy, where reliance on imported goods could undermine domestic production capabilities.

Tax experts have expressed differing views on the causes behind the notable increase in revenue from imports. However, there is a consensus on the need for the government to closely monitor this trend. The rising share of GST collections from imports not only highlights the growing dependence on foreign goods but also raises questions about the effectiveness of domestic manufacturing policies.

Higher Prices or More Imports?

Saurabh Agarwal, a tax partner at EY India, posits that one possible explanation for the increase in GST revenue could be that India is importing goods that could be produced domestically. He emphasized the importance of conducting a structural analysis to understand the implications of this reliance on imports. Agarwal suggests that one potential solution could involve reallocating unutilized funds from the Production Linked Incentive (PLI) schemes to attract and scale high-value manufacturing within India. This strategic shift could help bolster domestic production and reduce the need for imports.

Mahesh Jaising, a partner and indirect tax leader at Deloitte India, supports this perspective, noting that the growth in import revenues reflects an increase in the import of raw materials and intermediate goods. This trend indicates sustained manufacturing activity but also raises concerns about the long-term sustainability of relying on imports for essential inputs.

Conversely, Pratik Jain, a partner at Price Waterhouse & Co, points out that the increase in revenues from imports may also be driven by rising prices of imported goods across various commodities. This inflationary pressure on imported goods could contribute to the higher GST revenues, complicating the issue further and necessitating careful analysis of price trends in global markets.

Structural Improvements

Looking to the future, tax experts have identified several structural and legislative issues that require attention after nearly a decade of GST operations. Jain highlights that certain sectors, such as real estate, petroleum products, liquor, agriculture, and education, remain either outside the GST framework or are exempt from it. With the GST system having stabilized, experts believe it is an opportune moment to initiate discussions on how these sectors can be integrated into the GST system.

While immediate changes may not be practical, some areas, such as aviation turbine fuel (ATF) and natural gas, are seen as low-hanging fruit for potential inclusion in the GST framework, given their relatively minor revenue implications. Addressing these sectors could broaden the GST base and enhance revenue collection.

Another pressing issue is the inverted duty structure, which has become more pronounced since the rationalization of GST rates in September of the previous year. This structure occurs when the final product is taxed at a lower rate than its inputs, resulting in companies paying higher taxes on inputs than they collect upon selling the final product. This discrepancy can lead to cash flow issues for es and may necessitate policy adjustments to rectify the imbalance.

Easing Compliance

In addition to the aforementioned issues, Karthik Mani, a partner with the tax and regulatory practice of BDO India, has emphasized the clear “wish list” of industry stakeholders and taxpayers for improving the GST compliance landscape. Key requests include:

• A single pan-India GST registration to alleviate the compliance burden associated with state-wise registrations for es operating across multiple states.
• A “genuine” amnesty for routine reconciliation mismatches to prevent taxpayers from facing litigation over minor, non-fraudulent discrepancies.

Manoj Mishra, a partner and tax controversy management leader at Grant Thornton Bharat, noted that the growth in refunds is a positive sign of improved taxpayer facilitation. He highlighted a 28.4% increase in refunds, which reflects a conscious effort to enhance liquidity for es, particularly exporters, without compromising revenue collection. This trend suggests that the tax administration is increasingly balancing efficient revenue collection with timely taxpayer facilitation, which is crucial for fostering a conducive environment.

In conclusion, while the GST system has shown considerable growth and improvement over its nine years of implementation, significant challenges remain that require ongoing attention and reform. The increasing reliance on imports for GST revenue, the need for structural adjustments, and the desire for enhanced compliance measures are all critical areas that the government must address to ensure the long-term sustainability and effectiveness of the GST framework in India.