A tale of two indicators: Auto sales race ahead as GST collections lag

By: Team India Tracker

The latest GST and auto-sales trends paint a picture of consumption that is resilient but uneven. Lower GST rates have lifted volumes in several mass-market segments, while record auto sales underscore firm urban demand

The goods and services tax (GST) revenues slowed sharply in November, offering a mixed picture of demand just as other indicators point to a complex but broadly resilient economy. Net GST revenues rose only 1.3 per cent year-on-year to Rs 1.75 lakh crore, excluding the compensation cess. Including cess, total net receipts declined 4.25 per cent—a signal that headline consumption growth is not flowing uniformly into the tax base following the September rate cuts. 

The compensation cess itself fell steeply, dropping 69 per cent to Rs 4,006 crore from nearly Rs 13,000 crore a year earlier, reflecting the winding-down of the pandemic-era borrowing facility it finances. 

Slower month after rate rationalisation 

November’s receipts, which reflect transactions executed in October, mark a clear step-down from October’s already modest 0.6 per cent increase. Domestic transactions yielded Rs 1.24 lakh crore, down 2.3 per cent year-on-year. Sequentially, gross and net GST revenues fell 9.5 per cent and 6.1 per cent, respectively. 

Yet imports provided a rare point of strength. Gross GST from imports rose 10.2 per cent, offering some buoyancy to the overall net number. Export-related refunds, however, increased only 3.5 per cent, while refunds on domestic transactions fell 12 per cent, pulling total refunds 4 per cent below last November and more than 30 per cent below October. 

For April–November, gross and net GST revenues are up 8.9 per cent and 7.3 per cent respectively, to Rs 14.76 lakh crore and Rs 12.79 lakh crore. Compensation cess collections are down 14.3 per cent to Rs 84,144 crore. 

Government officials have sought to frame the slowdown in GST as a mechanical result of the September rate cuts rather than weakening demand. They cite a 15 per cent rise in taxable value of GST supplies in September–October, up from 8.6 per cent a year earlier—what they describe as a Laffer-curve-type response, where lower rates lift demand and compliance. 

The most pronounced increases in taxable value were in categories where rates were rationalised: prepared foods (17 per cent), buses and cars (20 per cent), pharmaceuticals (13 per cent), cement and ceramics (19 per cent), motorcycles and bicycles (18 per cent), tractors (17 per cent), and medical devices (19 per cent). Officials argue that companies passed on the rate reduction, and supply chains remained free of bottlenecks through the festive period. 

Not all categories benefited. Textiles grew just 8 per cent, down from 12 per cent, amid weak export demand. Two-wheeler value growth slowed to 18 per cent from 23 per cent as buyers shifted towards small cars. 

Other high-frequency data reinforce the mixed pattern. Passenger-vehicle wholesales rose 21 per cent year-on-year to around 425,000 units. Rail freight increased 4.2 per cent. But UPI transactions dipped 1 per cent in volume and 3.5 per cent in value from October’s record. Industrial output in October grew just 0.4 per cent, a 14-month low, and the HSBC manufacturing PMI fell to a nine-month low of 56.6 in November. Demand for work under the rural jobs scheme fell 32 per cent, its fifth consecutive monthly decline. 

Auto sector emerges as a bright spot 

Where demand is unambiguously strong is in the automotive market. Passenger-vehicle makers reported sales of 420,000–425,000 units in November, a 19–21 per cent increase from a year earlier. Carmakers attribute the surge to GST cuts, easier financing and new model launches. 

Maruti Suzuki posted its best November in four decades, with wholesales up 21 per cent to 170,971 units and retail sales up 31 per cent. Several models faced shortages, with waiting periods extending as production ran at full tilt. Tata Motors and Mahindra & Mahindra recorded 22 per cent growth each, while Hyundai rose 4.3 per cent and Toyota 19.5 per cent. Kia delivered its strongest month, selling 25,489 units. 

Two-wheeler makers also logged healthy gains: Honda grew 23 per cent, TVS 20 per cent and Royal Enfield 25 per cent. Commercial-vehicle sales strengthened as well, with Tata Motors up 25 per cent, Ashok Leyland 32 per cent and Eicher 36 per cent. Tractor sales posted a robust 33 per cent rise, supported by a strong kharif harvest, higher rabi sowing and the GST rate reduction. 

Interpreting the signals 

Taken together, the data capture an economy whose underlying consumption engine remains resilient but uneven. Lower GST rates have lifted volumes in several mass-market categories, yet tax collections have not fully captured this shift. Manufacturing momentum has cooled, rural stress remains visible and digital-payments activity has eased from record levels. 

The combination of softer GST receipts and strong goods-market volumes suggests that demand is present, but translating it into fiscal buoyancy may take time. The remainder of the financial year will test whether consumption strength can offset the muted industrial cycle—and whether GST compliance continues to stabilise under the new rate structure.