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While the recent GST rate cuts have brought in record-breaking festive sales, state finance officials remain concerned about a possible slump in tax revenues in the coming months. While the business houses are celebrating the highest growth in sales in years, the government braces for a slowdown post the festive season.
The GST Council’s restructuring of tax slabs from four main rates to two, along with a special category for luxury goods, has reduced prices of nearly 375 commonly used items, including automobiles, electronics, apparel, and footwear.
Trade associations report that this year’s Dasara sales were the highest in over a decade, with growth ranging between 35% and 100% across major retail categories.
“Consumer sentiment is clearly upbeat as the prices of many goods have fallen simultaneously,” said Mayank Rohtagi, secretary of the Bangalore Commercial Street Association.
“Sales growth averaged around 45% year-on-year, with electronics, garments, and footwear leading the surge. Some automobile brands have even reported double sales compared to last year.”
Retailers now expect the momentum to continue into Diwali, with hopes of another record-breaking round of purchases.
However, commercial tax authorities are far less optimistic. Officials warn that the current boost may be short-lived and insufficient to offset the expected revenue loss caused by the rate cuts.
“Revenue shortfall looks imminent as this spurt is unlikely to last beyond Diwali,” said Vipul Bansal, Commercial Taxes Commissioner. “With lower tax rates, we need at least 40% sustained sales growth to match last year’s collections, which seems unrealistic.”
Earlier projections estimated a Rs. 15,000-crore shortfall, but revised assessments suggest losses could exceed Rs. 17,000 crore.
Data shows that Karnataka’s GST collection in September stood at Rs. 13,495 crore, reflecting 7% gross growth, on par with the national average. However, after IGST settlements, the net collection was Rs. 6,653 crore, a modest 5% increase, well below the 12% growth rate seen earlier in the fiscal year.
Also Read: GST 2.0 Cuts Prices on Essentials: Are You Shopping Smart?
Chief Minister Siddaramaiah, who also serves as Finance Minister, had budgeted Rs. 92,133 crore in GST collections for FY25, with Rs. 39,132 crore raised so far.
Economic adviser Basavaraj Rayareddi said the government is exploring measures to enhance compliance and will continue to seek compensation from the Centre for the anticipated shortfall.
“Consumption has risen due to lower prices, and we hope this momentum sustains,” added B.T. Manohar, member of the State GST Advisory Committee. “But sustaining revenue alongside affordability remains the real test in the months ahead.”
