India’s January GST Collections Hit Rs 1.93: Robust Revenue Growth Ahead of Budget 2026
India’s Goods and Services Tax (GST) collections reached Rs 1.93 lakh crore in January 2026, registering a solid 6.2 percent year-on-year increase that signals sustained fiscal momentum just days before Finance Minister Nirmala Sitharaman presents Budget 2026. The gross GST revenue of Rs 1,93,384 crore, compared to Rs 1,82,094 crore in January 2025, underscores firm domestic demand and robust import activity even as certain stress points emerge in refunds and compensation cess collections.
This performance comes against the backdrop of India’s consumption-driven economic growth, with private final consumption expenditure reaching its highest share of GDP (61.5 percent) since 2012. The January GST numbers provide crucial data points for the government’s revenue projections as it prepares to table a budget focused on fiscal consolidation while addressing taxpayer expectations for relief measures.
Breaking Down the January Numbers
Gross Collections: Steady Upward Trajectory
The headline gross GST figure of Rs 1.93 lakh crore represents the accumulated revenue from all GST components before accounting for refunds. On a year-to-date basis covering April 2025 to January 2026, gross collections reached Rs 18,43,423 crore, marking a robust 8.3 percent annual growth that signals consistent compliance and consumption strength across the economy.
This cumulative performance substantially exceeds the previous year’s Rs 17,01,891 crore for the same ten-month period, demonstrating that despite global economic uncertainties and domestic challenges, India’s tax collection machinery continues to function efficiently.
Net Revenue: The Real Fiscal Picture
After factoring in refunds, net GST revenue for January stood at Rs 1,70,719 crore, growing 7.6 percent compared to Rs 1,58,701 crore in January 2025. This net figure represents the actual revenue available to central and state governments for budgetary allocation and expenditure.
Cumulatively, net revenue for April-January reached Rs 15,95,752 crore, up 6.8 percent year-on-year. This steady growth in net collections provides the fiscal foundation for the government’s budgeted expenditure programs and infrastructure investments.
Component-wise Breakdown for January 2026:
- Central GST (CGST): Rs 38,792 crore
- State GST (SGST): Rs 47,817 crore
- Integrated GST (IGST): Rs 1,06,775 crore
- Compensation Cess: Rs 5,768 crore
The IGST component, which accounts for inter-state transactions and imports, represents the largest single category at over Rs 1 lakh crore, reflecting India’s integrated national market under the GST framework.
Refunds: A Cooling Trend
Total GST refunds in January amounted to Rs 22,665 crore, registering a 3.1 percent decline from Rs 23,393 crore in January 2025. This represents a notable shift from recent months when refunds had been growing faster than collections.
Breaking down the refund categories:
The decline in domestic refunds could indicate improved input tax credit reconciliation and more accurate tax payments by businesses, reducing the need for subsequent adjustments. However, for the full April-January period, cumulative refunds reached Rs 2,47,672 crore, up 18.9 percent over the previous year, suggesting that while January saw a dip, the overall trend has been toward higher refund processing.
Domestic vs. Import Performance: Tale of Two Trends
Domestic Collections: Steady but Moderate Growth
Domestic GST collections—revenue generated from transactions within India—rose 4.8 percent to Rs 1,41,132 crore in January 2026, compared to Rs 1,34,641 crore in January 2025. For the April-January period, total domestic GST stood at Rs 13,49,795 crore, up 6.6 percent from Rs 12,66,741 crore in the previous financial year.
This moderate but consistent growth reflects sustained economic activity across consumption, services, and domestic manufacturing. According to the Economic Survey 2025-26 tabled by Finance Minister Sitharaman on January 29, domestic demand continues to underpin India’s economic growth in FY26, with private consumption expenditure increasing by approximately 7 percent.
The survey highlighted that “the strength in consumption reflects a supportive macroeconomic environment, characterized by low inflation, stable employment conditions, and rising real purchasing power”. With headline CPI inflation declining to just 1.7 percent driven by corrections in vegetable and pulse prices, consumers have greater purchasing capacity, which translates into higher GST collections.
Import GST: Robust Double-Digit Growth
In stark contrast to domestic collections, import-related GST demonstrated exceptional strength, increasing 10.1 percent to Rs 52,253 crore in January 2026 from Rs 47,453 crore in the same month last year. For the April-January period, GST on imports totaled Rs 4,93,628 crore, reflecting a substantial 13.4 percent rise compared to the previous year.
This robust import GST performance signals several economic dynamics:
- Strong Import Demand: Despite efforts to boost domestic manufacturing, India continues to import significant quantities of goods, particularly capital equipment, electronics, and raw materials
- Economic Activity: Higher imports often correlate with industrial production and investment activity, as manufacturers import machinery and inputs
- Consumer Spending: Import of consumer durables and luxury goods reflects healthy urban consumption patterns
The double-digit growth in import GST also contributes substantially to overall GST collections, partially offsetting slower growth in domestic revenue.
The Compensation Cess Collapse: A 55.6% Plunge
Perhaps the most striking number in the January report is the dramatic 55.6 percent tumble in compensation cess collections to just Rs 5,768 crore. This sharp decline reflects the “tapering of transitional mechanisms” as the GST compensation regime winds down.
Understanding the Compensation Cess Framework
The GST compensation cess was introduced under the GST (Compensation to States) Act 2017 to provide financial support to states experiencing revenue losses due to GST implementation. The compensation was originally promised for five years from July 1, 2017, guaranteeing states a 14 percent annual nominal revenue growth rate over their 2015-16 baseline.
The cess was levied on luxury and “sin” goods—including tobacco products, automobiles, aerated drinks, and coal—to create a fund that would compensate states for any revenue shortfall. The formula calculated the difference between a state’s potential revenue (assuming no GST) and its actual revenue, with the compensation cess fund covering the gap.
Why the Cess is Declining
The original five-year compensation period ended in June 2022, but was extended until March 2026. However, crucially, “states will not receive a share from the proceeds of this extended levy” during the extension period. Instead, the extended cess collections are being used to repay loans taken by the central government during the COVID-19 pandemic to compensate states when cess collections fell short.
The 55.6 percent decline in January 2026 likely reflects:
- Reduced Applicability: Fewer goods now attract the cess as rates have been rationalized
- End of Transition: As the compensation mechanism winds down completely by March 2026, the revenue base naturally shrinks
- Policy Shifts: Some luxury items may have seen cess rate reductions or reclassifications
This decline poses challenges for states that had become dependent on compensation cess revenue, forcing them to “focus on alternative revenue sources and fiscal strategies to maintain financial stability”.
State-by-State Performance: Winners and Losers
The January GST data reveals starkly uneven revenue performance across Indian states and union territories, with manufacturing-heavy states leading gains while resource-dependent and smaller states face declines.
Top Performers: Manufacturing Powerhouses
Haryana: Leading all states with a remarkable 27 percent growth, Haryana’s performance reflects its proximity to Delhi, strong automotive and electronics manufacturing base, and robust industrial activity.
Maharashtra: India’s industrial heartland posted 15 percent growth, maintaining its position as the single largest contributor to GST collections nationwide. Maharashtra, along with Karnataka, Gujarat, Tamil Nadu, and Haryana, together contributed over 40 percent of total GST collections.
Himachal Pradesh: Surprising many with 18 percent growth, the hill state’s performance likely reflects pharmaceutical manufacturing and industrial activity in districts like Baddi.
Gujarat: The state’s 13 percent growth underscores its diverse industrial base spanning petrochemicals, pharmaceuticals, textiles, and diamond processing.
Punjab: Despite agricultural challenges, Punjab managed 12 percent growth, possibly driven by services and light manufacturing.
Mid-Tier Growth States
Several economically significant states posted modest but positive growth:
- Karnataka: 7 percent growth, reflecting Bangalore’s IT services sector and state’s manufacturing activities
- Tamil Nadu: 5 percent growth from the southern industrial powerhouse
- Delhi: 3 percent growth from the national capital’s services-dominated economy
- Uttar Pradesh: Just 2 percent growth despite being India’s most populous state
- West Bengal: Minimal 1 percent growth, indicating economic challenges
Declining States: Resource and Agricultural Dependence
Several states recorded concerning revenue declines:
Chhattisgarh: The steepest fall at minus 23 percent, likely reflecting slowdown in coal and steel-related economic activity.
Madhya Pradesh: Minus 15 percent, a significant reversal for the central Indian state.
Odisha: Minus 10 percent, potentially related to mining and industrial sector performance.
Jharkhand: Minus 6 percent, another mineral-rich state facing revenue challenges.
Ladakh and Lakshadweep: Both recorded minus 30 percent, though their absolute revenue contributions are small.
These declines expose the uneven economic development across India’s federal structure and highlight the continued dependence of certain states on resource extraction and commodity prices.
Union Territories: Mixed Performance
Among Union Territories, performance was similarly volatile:
- Chandigarh: Strong 15 percent growth
- Puducherry: Healthy 11 percent growth
- Lakshadweep: Steep decline, though from a tiny base
Budget 2026 Context: Revenue and Fiscal Targets
The January GST numbers arrive at a crucial juncture, just days before Finance Minister Nirmala Sitharaman presents her ninth consecutive Union Budget on February 1, 2026. The revenue performance provides important context for the government’s fiscal roadmap.
Fiscal Deficit Targets
The fiscal deficit for FY26 is budgeted at 4.4 percent of GDP, keeping the government firmly on its fiscal consolidation path. This target is lower than the revised estimate of 4.8 percent for FY25. Revenue deficit is targeted at 1.5 percent of GDP, also lower than the revised estimate of 1.9 percent in 2024-25.
Meeting these targets requires sustained revenue growth across all tax categories, making the 8.3 percent year-to-date GST growth a positive indicator.
Tax Revenue Projections
Gross tax collections for FY26 are estimated at Rs 42.7 lakh crore, reflecting growth of about 11 percent over FY25:
- Direct taxes: Rs 25.2 lakh crore
- Indirect taxes: Rs 17.5 lakh crore
Within indirect taxes, GST revenue is projected at Rs 11.78 lakh crore in FY26, up 11 percent year-on-year. The strong performance in April-January (Rs 18.43 lakh crore gross) suggests the government is on track to meet or potentially exceed this target, especially if the remaining months maintain similar momentum.
Borrowing Program
The Centre’s gross market borrowing for FY26 is pegged at Rs 14.80 lakh crore. Stronger tax collections reduce the government’s dependence on market borrowing, potentially keeping bond yields stable and reducing interest costs.
What the Numbers Mean for Taxpayers
As millions of Indians await Budget 2026 announcements, the strong GST collections create fiscal space for potential tax relief measures that have been widely anticipated.
Salaried Class Expectations
Top expectations include:
- Standard deduction hike to Rs 1 lakh from the current Rs 75,000
- 30% tax slab threshold moved from Rs 24 lakh to a higher level under the new tax regime
- Section 80C limit increase from the frozen Rs 1.5 lakh (unchanged since 2014) to Rs 2 lakh
Investment and Capital Gains
Key demands include:
- Raising long-term capital gains exemption from Rs 1.25 lakh to Rs 2 lakh
- Restoration of indexation benefit for real estate and debt funds
- Reducing LTCG tax rate to 10 percent
Senior Citizens and Healthcare
Senior citizens seek:
- Interest income exemption hiked from Rs 50,000 to Rs 1 lakh
- Section 80D health insurance deduction increased to Rs 1 lakh for senior citizens
- Separate tax slabs for senior citizens
Conclusion: Steady Revenue in Uncertain Times
India’s January 2026 GST collections of Rs 1.93 lakh crore, representing 6.2 percent year-on-year growth, paint a picture of fiscal resilience amid global economic uncertainties. The 8.3 percent cumulative growth for April-January provides the government with a solid revenue foundation as it prepares Budget 2026.
The data reveals a nuanced economic landscape: robust import activity (10.1 percent growth) signals continued industrial demand and consumer spending on imported goods, while moderate domestic collection growth (4.8 percent) reflects steady but not spectacular consumption patterns. The 55.6 percent plunge in compensation cess marks the end of a transitional era, forcing states to develop sustainable revenue strategies beyond central compensation.
State-wise performance underscores India’s uneven development trajectory, with manufacturing powerhouses like Haryana (27 percent), Maharashtra (15 percent), and Gujarat (13 percent) surging ahead while resource-dependent states like Chhattisgarh (minus 23 percent) and Madhya Pradesh (minus 15 percent) face revenue challenges.
As Finance Minister Sitharaman rises to present Budget 2026 on February 1, these numbers provide both encouragement and caution. Strong GST growth creates fiscal space for potential tax relief to the middle class and stimulus measures to boost consumption further. However, the need to maintain fiscal discipline—targeting 4.4 percent fiscal deficit—means any concessions must be carefully calibrated.
For taxpayers anxiously awaiting announcements on standard deductions, tax slabs, and capital gains relief, the robust GST performance offers hope that the government can afford some measure of relief while staying committed to its consolidation path. The coming days will reveal whether that hope translates into tangible benefits in Budget 2026.