Why in the News?

Since the Goods and Services Tax (GST) system started in 2017, India’s GST collections every April have regularly reached new record highs.

What was the GST collection in April and its year-on-year growth?

Record High Collection: In April 2025, India collected ₹2.37 lakh crore in gross GST, marking the highest ever monthly collection since the GST regime began in 2017. Example: This was up from ₹2.10 lakh crore in April 2024.
Strong Year-on-Year Growth: This represented a 12.6% growth over the previous year’s April figures, showing improved compliance and economic activity. Example: After refunds, the net collection for the Centre rose by 9.1% compared to April 2024.

How has GST compliance and fintech adoption boosted tax collection?

Higher Tax Filing Discipline: Increased awareness and digital tracking have improved GST compliance among businesses. Eg: The consistent rise in GST collections every April since 2018 from ₹1.03 lakh crore to ₹2.37 lakh crore indicates better adherence to filing norms.
Faster Refunds Encourage Participation: Swift processing of refunds, especially for small businesses, has encouraged timely and accurate GST filing. Eg: Refunds to exporters rose by 86% in April 2025, indicating improved trust in the system.
Fintech Integration Supports MSMEs: With 87% fintech adoption in India, MSMEs have better access to formal banking and invoicing systems, helping them meet compliance requirements. Eg: Digital invoicing apps and GST-ready accounting tools have simplified filings for small traders and manufacturers.
Digital Audit Trails Enhance Enforcement: Fintech tools enable real-time tracking of transactions, reducing scope for tax evasion. Eg: E-invoicing and auto-generated returns allow tax authorities to detect discrepancies quickly.
COVID-19 Accelerated Formalization: The pandemic years pushed many informal businesses into the digital and formal economy, making tax compliance a necessity. Eg: Many first-time filers from the MSME sector were onboarded via digital platforms during 2020–21, increasing the taxpayer base.

What led to the 86% rise in refunds to exporters?

Improved GST Processing Systems: The government has streamlined refund procedures with faster digital approvals and reduced delays. Eg: Automation of refund claims has enabled quicker credit settlements to exporters within defined timelines.
Higher Volume of Export Orders: A surge in international demand led to increased export activity, resulting in more refund claims under GST. Eg: Orders from regions like Africa, Asia, and the Americas rose significantly in April 2025, boosting GST refund outflow.
Greater GST Compliance by Exporters: Better record-keeping and digital documentation encouraged more businesses to file refund claims accurately and on time. Eg: Exporters using fintech platforms for e-invoicing were able to submit error-free refund claims swiftly.

What is HSBC India PMI?

The HSBC India PMI refers to the Purchasing Managers’ Index compiled by HSBC in partnership with S&P Global to track the economic health of India’s manufacturing and services sectors.

What is Purchasing Managers’ Index (PMI)?

Purchasing Managers’ Index (PMI) is an economic indicator that measures the health and performance of a country’s manufacturing and services sectors. It is based on surveys of purchasing managers across various industries.
Index Scale:
- Above 50: Indicates expansion in economic activity
- Below 50: Indicates contraction
- Exactly 50: No change

Why did the HSBC India PMI show a 10-month high in April?

Surge in New Business Orders: Domestic and international demand for Indian-manufactured goods increased, boosting factory activity. Eg: Indian companies saw the largest increase in overseas orders in over 14 years.
Export Growth from Global Demand: Strong demand from key regions like Africa, Asia, Europe, West Asia, and the Americas fueled export-oriented production. Eg: Exporters rushed to fulfill orders before the U.S. tariff pause on Chinese goods ends in July.
Positive Business Sentiment: Companies expanded production and hiring in response to growing order books and market optimism. Eg: Firms ramped up manufacturing capacity to take advantage of global supply chain shifts toward India.

How has the U.S. tariff pause on China affected India’s manufacturing sector?

Increased Export Orders to India: Global buyers are shifting orders from China to India to avoid potential U.S. tariffs. Eg: Indian manufacturers received a surge in foreign orders, especially from the U.S., ahead of the July 9 tariff deadline.
Realignment of Supply Chains: India is emerging as an alternative manufacturing base due to U.S.–China trade tensions. Eg: Apple announced plans to source ‘most of its iPhones’ for the U.S. market from India.
Short-Term Boost in Manufacturing Activity: Anticipated U.S. tariffs on Chinese goods have created temporary opportunities for Indian exporters. Eg: India’s manufacturing sector saw a sharp rise in April output, contributing to a 10-month high in the HSBC PMI.

Way forward:

Strengthen Fintech-GST Integration: Deepen digital infrastructure and incentivize e-invoicing adoption among small businesses to sustain high compliance and broaden the tax base.
Enhance Export Ecosystem: Build long-term trade resilience through export incentives, logistics upgrades, and faster refund systems to capitalize on shifting global supply chains.

Mains PYQ:

[UPSC 2019] Explain the salient features of the constitution(One Hundred and First Amendment) Act, 2016. Do you think it is efficacious enough ‘to remove cascading effect of taxes and provide for common national market for goods and services’?

Linkage: The article shares the latest information on how much money the government collected through GST and how well people are following GST rules. The question is asking about which earlier taxes were included under GST and how GST has affected government income.

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