Karnataka and Telangana Lead Large States in GST Revenue Growth Post-Rate Cut

Karnataka and Telangana Lead Large States in GST Revenue Growth Post-Rate Cut

Issue: To analyze the Goods and Services Tax (GST) revenue performance of major states in October 2025, specifically determining which large states effectively countered the revenue drag from the recent GST rate rationalization (GST 2.0).

Facts:

• The GST rate rationalization initiative, which cut the four-slab structure to two main slabs (5% and 18%), was rolled out in late September 2025.
• Overall GST collections for October 2025 stood at ₹1,95,936 crore, up 4.6% Year-on-Year (YoY).
• Major states had previously expressed apprehension about revenue decline post-rate rationalization.

Decision:

Karnataka and Telangana emerged as the fastest-growing large states in GST collections in October 2025, both recording an identical 10% Year-on-Year rise in revenue.

Key TakeDowns:

• Growth Leaders:
  • Karnataka saw collections climb to ₹14,395 crore (from ₹13,081 crore in Oct 2024), leading the YoY growth among major states.
  • Telangana reported ₹5,726 crore (from ₹5,211 crore a year earlier), also registering a 10% rise.
• Other Major States:
  • Gujarat grew by 6%.
  • Tamil Nadu recorded a 4% rise.
  • Maharashtra clocked a modest 3% increase, despite contributing over 40% of total revenue.
• Source of Resilience: The growth is credited to the combination of festive-season demand (boosting consumption volumes) and the early positive impact of the GST rate rationalization, which spurred purchases.
• Fiscal Importance: Karnataka, along with Maharashtra, Gujarat, Tamil Nadu, and Haryana, contributed over 40% of the country’s total GST revenue, underscoring their role as critical consumption and production hubs.