August GST Hits Nearly ₹2 Lakh Crore After Refunds Jump

India’s gross GST collections rose 14.8% to ₹1,99,853 crore in August, covering July’s business. Net collections rose 8.3% to ₹1,68,057 crore after refunds of ₹31,795 crore.

Net domestic GST, the cash left after domestic refunds, grew only 3.4%. That is the figure the GST Council takes into its 12 September meeting.

A Near ₹2 Lakh Crore Month

The month’s gross take landed ₹147 crore short of ₹2 lakh crore and below July’s ₹2.11 lakh crore, even as year-on-year growth stayed in double digits for a third month after June’s 13.9% and July’s 15.4%. Central GST was ₹38,413 crore, State GST ₹46,316 crore, and integrated GST ₹1,15,124 crore, with no separate compensation-cess line after that levy stopped from 1 February.

AUGUST 2026 AGAINST LAST AUGUST

April-August gross revenue is ₹10,42,757 crore, up 11%, while net for the same stretch is ₹8,89,523 crore, up 9% from ₹8,15,939 crore. Full-year gross in 2025-26 was about ₹22.27 lakh crore, against about ₹7.4 lakh crore in 2017-18, and GST taxpayers at 1.65 crore as of May, up from 66.5 lakh at launch in 2017.

Those longer-run gains are real. They do not change what August paid out after refunds.

Last Year’s Base Was Revised Down

The 14.8% headline sits on a quieter change in the year-ago number. Collections for August 2025 were cut from the originally reported ₹1.86 lakh crore to ₹1.74 lakh crore, and the official comparator is now ₹1,74,116 crore.

Had that older print been left in place, the same August 2026 mop-up would have grown about 7%. The ministry still published 14.8% against the revised base, which is the number that will travel through briefings and budget notes.

Revisions happen. Treating the 14.8% as a sudden burst in July’s shops and factories, without that lower base, overstates the month. Domestic GST at 9.3% is closer to the pace the home economy actually taxed.

The 72.6% Refund Surge

Refunds are where the gross print and the cash in the till part company. Total refunds rose 67.9% to ₹31,795 crore, with domestic refunds up 72.6% to ₹18,490 crore and export refunds through ICEGATE up 61.8% to ₹13,305 crore.

THE REFUND DRAIN

• Gross to net: ₹31,795 crore came off the ₹1,99,853 crore gross print, leaving ₹1,68,057 crore.
• Domestic keep-rate: Net domestic GST of ₹1,18,759 crore grew 3.4% after those home refunds.
• Customs keep-rate: Net GST on imports of ₹49,299 crore grew 22.3% after ICEGATE payouts.
• July contrast: July’s refunds were ₹29,968 crore, up 13.1%, and net still rose 15.8% to ₹1.81 lakh crore.

August’s refund line was larger than July’s even as gross slipped, so net fell a little over 7% month on month from that ₹1.81 lakh crore. Vivek Jalan, partner at Tax Connect Advisory Services LLP, tied the domestic spike to inverted duty and said the Council should fix it on 12 September.

Faster payouts are part of this, not a side note. From 1 November 2025 the department has been able to release 90% of inverted-duty refunds on a provisional basis within seven days for lower-risk claims, a window that used to sit with exporters. Average processing is still about 50 days against a 60-day rule, a senior official has said, so more inversion and a quicker cheque book hit the same month.

GST 2.0 Cut Output Rates and Raised Refunds

The 56th GST Council, on 3 September 2025, collapsed the old four-slab map into two GST slabs of 5% and 18%, with 40% for luxury and sin goods. Those rates took effect on 22 September 2025. Finished medicines, mass-market garments up to ₹2,500, cheap footwear, and a long list of packaged foods moved to 5% so households would pay less at the counter.

A drug maker still pays 18% on many active ingredients and packs the tablet at 5%. Credit piles up on the books and has to come back as a refund, because the output tax cannot absorb the input tax. That is inverted duty in one factory, and August’s domestic refund line is what it looks like in the monthly accounts, almost a year into the new slabs.

GST 2.0 simplified slabs, but it also deepened the inverted tax problem.

Brijesh Kothary, Partner, Khaitan & Co

Kothary also noted that the refund formula still does not cover input services, so a legislative change is needed if that credit is to come back. Tax lawyers point to the Supreme Court’s VKC Footsteps ruling, which confined inverted-duty refunds to input goods and left services as a policy call for the Council.

Sectors With a Wider Gap

WHERE THE NEW SLABS LEFT CREDIT STUCK

• Medicines: Finished formulations at 5% or nil, with APIs still at 18%, a gap NIPFP fellow Pramod Sinha said widened the tax gap on medicines after the cut.
• Garments and footwear: Mass-market apparel and pairs up to ₹2,500 at 5%, with dyes, chemicals, soles and packing still at 12-18%.
• Packaged foods: Many FMCG lines at 5%, while kraft paper, laminates and some adhesives stayed higher, a small inversion that adds up across factories.
• Steel-using goods: Bicycles, some farm machines and tractors at 5%, with steel still at 18%.

Sinha’s October 2025 note, from the finance ministry’s own research shop, is blunt that GST 2.0 only partly closed inversion and in some lines moved the problem into new products.

Sectors Already Aligned

The same round did fix long-running mismatches. Man-made fibre fell from 18% to 5% and yarn from 12% to 5%, lining up with fabric. Sulphuric acid, nitric acid and ammonia used in fertiliser also moved to 5%. Solar components went from 12% to 5%, which narrows trapped credit even though electricity itself stays outside GST.

Those fixes should, over time, shrink refunds in textiles and fertiliser. They do not cancel the new inversion in pharma, cheap garments and packaged foods, which is the domestic-refund story in this print.

Import GST Rose 29%, Domestic Tax 9.3%

Import GST of ₹62,604 crore was 31.3% of the August gross, against 27.9% a year earlier, and that slice grew 29% while domestic GST grew 9.3%. Manoj Mishra, partner and tax controversy leader at Grant Thornton Bharat, said the mix means trade-linked activity is still doing a larger share of the buoyancy work.

July had the same tilt, with import GST up 28.8% to ₹66,511 crore and domestic up 10.1% to ₹1.45 lakh crore. Abhishek Jain at KPMG India folded the 14.8% into a cheer with first-quarter GDP, but the monthly tax mix is narrower than that reading: the home base grew in single digits, and after refunds it grew 3.4%.

A loud public reading of the 14.8% print treats it as proof that the tax net now covers almost everyone who buys anything. GST does sit on consumption. It does not follow that the Centre and the states kept 14.8% more cash from shops and factories inside the country.

September 12 Puts Inverted Duty on the Table

The 57th meeting of the constitutional GST Council is set for 12 September in New Delhi, with officers gathering on 11 September. It will be the first ministerial sitting since the 3 September 2025 rate round, a 374-day gap. The formal agenda is still being locked, and several files sit in the same pile: leftover compensation-cess credit after 1 February, simpler registration, ITC disputes, and inverted-duty refunds.

THE ROAD TO SEPTEMBER 12

1. September 3, 2025: The 56th Council approves two main slabs of 5% and 18%, with 40% for luxury and sin goods.
2. September 22, 2025: The new rates take effect, including the 5% cuts on medicines, cheap garments and many foods.
3. November 1, 2025: Provisional 90% refunds for inverted-duty claims begin, on lines already used for exports.
4. February 1, 2026: Compensation cess on specified goods stops, leaving unused cess credit on some books.
5. September 1, 2026: August GST data shows domestic refunds up 72.6% and net domestic GST up 3.4%.
6. September 12, 2026: The 57th Council meets in Delhi on refunds, inversion and leftover cess credit.

A senior official has said ministers are likely to discuss making 90% of input-tax-credit refunds automated and risk-based, so the system, not an officer, clears low-risk claims, a shift that needs an amendment to the GST Act. Rate cuts on mobile phones from 18% have also been floated and are not decided.

The sharp 72.6% surge in domestic refunds, driven by inverted duty structures, signals a structural imbalance that warrants urgent redressal. The Hon’ble GST Council may address these anomalies in its forthcoming meeting to ensure that the tax framework supports competitiveness.

Vivek Jalan, Partner, Tax Connect Advisory Services LLP

Officers meet on 11 September. Ministers meet the next day in New Delhi with August’s refund line already in the papers.