India’s June GST collections rose 13.9% year-on-year to ₹1.95 lakh crore, driven largely by import IGST, which surged 34.6% compared with June 2025, up from 17.2% growth in May. Domestic GST collections grew by a more modest 6.5%, suggesting that the sharp increase in overall collections owes less to a broad-based improvement in domestic value addition. Some economists have argued that this reflects stronger imports of capital goods and industrial inputs. However, May petroleum products’ trade data and Q1 FY27 data on the performance of the eight core industries, point to a rather different explanation. June GST collections reflect economic activity during May. While crude and petroleum products constituted a 54% rise this May (YoY) in merchandise imports by value, the other chunk was gold, which constituted another 34% rise. The surge in gold price, by nearly 60% between last May and this May, suggests hedging during difficult times, rather than broad-based economic activity. To stem gold imports, the government hiked its import duty from 6% to 15% on May 13, which likely added to the May import GST kitty. This period also coincided with the rupee depreciating by almost 6% against the U.S. dollar since late February. This coupled with a spike in freight charges, and a 14.5% rise on non-oil imports in May at elevated global prices mechanically raised the June tax base. This suggests that much of the import GST rise is driven by imported inflation and currency depreciation rather than domestic production growth, indicating an unwelcome increase due to higher prices.

Read alongside the performance of India’s eight core industries, which expanded by only about 2.8% in Q1 FY27 compared with around 6% in the corresponding period last year, the domestic economy appears more subdued. Growth has been expectedly weak in crude oil, natural gas, refinery products, fertilizers and electricity. The latest HSBC Manufacturing PMI reading of 54.2 likewise points to steady but moderating factory activity, marking the second-lowest expansion in 13 months. These figures come as India marks nine years of GST as a unified destination-based indirect tax. The government can point to the expansion of the tax base from about 66 lakh taxpayers in 2017 to over 1.65 crore today, reflecting better compliance, greater formalisation, and faster refunds, though input tax credit, litigation and federal balance in revenue sharing issues remain unresolved. GST has strengthened India’s indirect tax architecture. Yet, the June numbers are a reminder that a growing share of the recent buoyancy appears to have been underwritten by imported inflation and a depreciating rupee rather than stronger domestic value addition.