CA Sansaar
GST Shock Strains Centre’s Finances, Fiscal Deficit Balloons
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India’s fiscal position came under pressure in November, with the government’s fiscal deficit widening markedly as the impact of recent Goods and Services Tax (GST) rate reductions began to weigh on revenues. According to data released on Wednesday by the Controller General of Accounts (CGA), the fiscal deficit for the first eight months of FY26 reached 62.3 per cent of the annual target, nearly 10 percentage points higher than the level recorded during the same period last year.
For the current financial year, the Centre has pegged the fiscal deficit at ₹15.69 lakh crore, equivalent to 4.4 per cent of GDP, as outlined in the Union Budget for FY26. The government’s total expenditure for the year has been estimated at ₹50.65 lakh crore.
Expenditure momentum remained firm, with November spending rising 12 per cent year-on-year, pushing cumulative expenditure for April–November FY26 to ₹29.26 lakh crore, around 7 per cent higher than a year ago. In contrast, revenue performance lagged, with total receipts declining 13 per cent in November and showing only a modest 3 per cent growth on a cumulative basis.
Data also indicate that the fiscal slippage had already begun to surface earlier in the year. During April–October 2025, the fiscal deficit stood at 52.6 per cent of the full-year target, about 6 percentage points higher than the corresponding period of FY25.
Analysts point to tax collections as the primary area of concern. Tax revenue has reached only 49 per cent of the budgeted estimate, compared with 56 per cent during the same period last year, underscoring the visible impact of GST rate cuts. However, some relief is expected on the direct tax front in December, driven by advance tax payments, particularly from corporate taxpayers.
The effect of the sweeping GST rate reductions implemented on September 22 has also been reflected in indirect tax data. GST collections in November—representing economic activity in October—stood at ₹1.7 lakh crore, broadly unchanged from ₹1.69 lakh crore recorded in November 2024. Including the compensation cess, which was previously part of the gross GST tally, total collections declined 4 per cent year-on-year to ₹1.75 lakh crore. GST revenue figures for December are scheduled for release on Thursday.
For the current financial year, the Centre has pegged the fiscal deficit at ₹15.69 lakh crore, equivalent to 4.4 per cent of GDP, as outlined in the Union Budget for FY26. The government’s total expenditure for the year has been estimated at ₹50.65 lakh crore.
Expenditure momentum remained firm, with November spending rising 12 per cent year-on-year, pushing cumulative expenditure for April–November FY26 to ₹29.26 lakh crore, around 7 per cent higher than a year ago. In contrast, revenue performance lagged, with total receipts declining 13 per cent in November and showing only a modest 3 per cent growth on a cumulative basis.
Data also indicate that the fiscal slippage had already begun to surface earlier in the year. During April–October 2025, the fiscal deficit stood at 52.6 per cent of the full-year target, about 6 percentage points higher than the corresponding period of FY25.
Analysts point to tax collections as the primary area of concern. Tax revenue has reached only 49 per cent of the budgeted estimate, compared with 56 per cent during the same period last year, underscoring the visible impact of GST rate cuts. However, some relief is expected on the direct tax front in December, driven by advance tax payments, particularly from corporate taxpayers.
The effect of the sweeping GST rate reductions implemented on September 22 has also been reflected in indirect tax data. GST collections in November—representing economic activity in October—stood at ₹1.7 lakh crore, broadly unchanged from ₹1.69 lakh crore recorded in November 2024. Including the compensation cess, which was previously part of the gross GST tally, total collections declined 4 per cent year-on-year to ₹1.75 lakh crore. GST revenue figures for December are scheduled for release on Thursday.
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