Is GST Growth Now Tracking Nominal GDP? 15Feb2026
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Recent data show that both net GST growth and nominal GDP growth in India have moderated — even as real GDP growth remains relatively strong, according to official government figures.
Since nominal GDP equals real growth plus inflation, the combination of robust real growth and slower nominal expansion implies a relatively subdued GDP deflator.
In this context, it is worth examining whether GST data offer a useful cross-check on broader economic growth dynamics.
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1. What GST Growth Tells Us About India’s Economy
India’s Goods and Services Tax (GST), introduced in Jul2017, has become a key barometer of economic activity. Yet assessing its growth relative to the broader economy is not as straightforward as headline numbers suggest.
While official documents such as the Economic Survey 2025–26 compare gross GST collections with nominal GDP growth, a closer examination indicates that net GST may be a more appropriate benchmark — and that comparisons using earlier, more volatile years can distort the picture.
2. Why Earlier Years Distort the Comparison
As shown in the chart below, net GST and gross GST growth rates in FY 2021-22 and 2022-23 jumped to exceptionally high levels — 22-30 per cent — far exceeding nominal GDP growth rates of 14-19 per cent during the same period.
These years were outliers, driven by the post-pandemic rebound, base effects, elevated inflation and possible improvements in compliance.
Comparing these exceptional growth rates with nominal GDP can give a misleading impression of long-term trends.
Clear moderation in the past three years
By contrast, the data from FY 2023–24 onwards show a clear moderation. Net GST and gross GST growth eased to 13.4 per cent in 2023–24, fell further to 8.6 per cent in 2024–25 and stood at merely 6.8 per cent in the first ten months of 2025–26.
Nominal GDP growth over the same period has also slowed, making these recent years a more reliable basis for comparison.
Focusing on this post-2023 phase provides a more accurate view of how GST is tracking the economy under normalised conditions.
It may be noted for full year of 2025-26, the nominal GDP growth is 8.0 per cent as per latest GDP figures put out by the government.
Chart showing India's Gross and Net GST Vs Nominal GDP Growth Rate >
data sources:
GST statistics yearly FY wise
GST monthly collections archives
GST portal news and updates
A key question is whether GST growth should be compared with nominal GDP using gross or net figures. Gross GST shows total collections before refunds, while net GST reflects what the government actually retains after refunds, including those for exports and special adjustments.
Refunds have been in the range of 10.8 per cent to 13.4 per cent of gross collections over the past six years, meaning a significant portion of reported gross GST never stays with the government.
Timing effects can further inflate gross GST growth, giving a misleading impression of revenue performance.
Post-2024 data show that net GST growth is consistently lower than gross GST. Among all measures, net GST provides the clearest view of how tax collections are tracking the economy.
The slowdown in net GST suggests that GST tax collections growth is lagging behind overall economic expansion, highlighting the limitations of headline gross GST figures, without considering refunds.
4. Comparing GST growth to Nominal GDP Fair?
Comparing GST growth to Nominal GDP is often an "apples-to-oranges" exercise due to these structural limitations:
Exclusion of Major Sectors: GDP includes petroleum, electricity and alcohol, while GST excludes them, creating a massive base mismatch.
Agriculture's Weight: Farming contributes significantly to India's GDP but is largely exempt from GST, decoupling the two metrics.
The Informal Economy: GDP uses proxies to estimate informal activity, whereas GST only captures the formal economy.
Import Distortion: Gross GST includes IGST on imports; rising imports can inflate tax figures even if domestic GDP (production) is slowing.
Export Zero-Rating: High export growth boosts GDP but triggers GST refunds, causing Net GST growth to lag behind economic output.
Several goods and services remain exempt or taxed at zero rates.
GST is sensitive to final retail prices, while Nominal GDP is influenced by a broader "GDP Deflator" (WPI and CPI mix).
Input Tax Credit (ITC): Increased efficiency in businesses claiming ITC reduces net tax collections without reflecting a drop in actual GDP.
Periodic government cuts or rate revisions to GST rates lower tax growth even if the volume of goods sold (GDP) rises.
Timing Mismatches: GST is recorded on a cash basis (when paid), while GDP is calculated on an accrual basis (when value is created), leading to quarterly lags.
GDP measures total economic activity as C + I + G + (X − M) -- that is, consumption, investment, government spending and net exports.
GST only captures the parts of the economy where taxes are actually collected: consumption and much of investment.
It does not cover government spending on services like defense or administration, and exports are zero-rated to keep them competitive, so they count toward GDP but generate little or no GST.
GST reflects only the taxable segment of the economy. Nominal GDP, by contrast, encompasses the entire economic universe. Perfect alignment between the two should not be expected.
In short: GST tracks only a slice of the economy, not the entire GDP.
5. Reading the Recent Trend
Focusing on the normalisation phase since 2023–24, the table shows that GST growth is no longer significantly outpacing nominal GDP growth.
Both net GST and nominal GDP growth have moderated year by year: net GST growth fell from 13.4 per cent in 2023–24 to 6.8 per cent in the first ten months of 2025–26, while nominal GDP growth also slowed over the same period.
As per the advanced estimates released on 07Jan2026, nominal GDP growth for the full year 2025–26 is projected at 8.0 per cent. While this covers the entire fiscal year, the GST data we have are only for the first ten months.
Although the comparison is not perfect, looking at 10-month gross and net GST growth alongside this nominal GDP estimate provides a useful indication of how GST collections are tracking the economy.
If real GDP growth remains comparatively strong while nominal GDP growth slows, the implied GDP deflator is low. In this setting, GST — which is levied on transaction values at current prices — is naturally aligned with nominal GDP rather than real GDP.
The data therefore suggest that GST can provide a meaningful cross-check on economic momentum, particularly for the formal, taxable economy.
5. Conclusion
Recent data show that net GST growth has moderated since 2023, broadly tracking nominal GDP growth, while the extraordinary post-pandemic surge has faded.
Comparisons are most meaningful when using net GST rather than gross GST, and when focusing on the post-2023 normalisation period rather than the volatile rebound years of 2021-22 and 2022-23.
The slowdown in net GST growth suggests that GST tax collections are not keeping pace with overall economic expansion, highlighting the limitations of headline GST figures.
Looking ahead, the so-called "GST 2.0" rationalisation of rates from Sep2025 may influence collections further, meaning future GST growth will depend on both underlying economic activity and ongoing policy adjustments.
(The blog is not yet completed; i shall complete the same in the next two to three years)
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References and additional data:
Economic Survey 2025-26 PDF - presented on 30Jan2026
NIPFP Research Paper - Revenue Performance Assessment of Indian GST
8 Years of GST Report
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