SBI Report: FY26 GST Revenue to Exceed Budget Targets, States Will Remain Net Gainers

SBI Report: FY26 GST Revenue to Exceed Budget Targets, States Will Remain Net Gainers

Issue: To analyze the long-term revenue impact of the GST 2.0 rate rationalization on the Central and State exchequers, forecasting whether the increased consumption volume (buoyancy) will fully compensate for the sharp reduction in tax rates and ensure overall fiscal targets are met for FY26.

Facts:

• The GST Council introduced a streamlined rate regime in September 2025, featuring four categories: 0% exempt, 5% and 18% standard tiers, and a 40% rate for luxury/sin goods.
• Despite initial fears from states about massive revenue loss post-rationalization, October 2025 GST collections showed resilience.
• The SBI Research report conducted an analysis to project the full-year revenue outlook for FY26.

Decision:

SBI Research projected that India’s overall Goods and Services Tax (GST) collections for FY26 will exceed the budgeted GST collections, and that most states will remain net gainers despite the revenue cuts.

Key TakeDowns:

• Exceeding Budget Targets: The assessment is based on the expectation that the consumption boost and subsequent growth (tax buoyancy) arising from the simplified GST slabs will result in higher aggregate tax collection than what was conservatively projected in the Union Budget.
• States as Net Gainers: SBI Research projects that the vast majority of states will be net gainers from the rationalization throughout FY26.
  • Projected Gains: Maharashtra is estimated to record gains of 6%, while Karnataka could see an even stronger improvement of 10.7%.
  • Overall Conclusion: The report asserts, “Thus, overall states will remain net gainers post GST rationalisation”. * Historical Pattern Endorsed: The confidence is reinforced by historical data from previous GST rate adjustments (2018 and 2019), which demonstrated that collections typically recover after a brief transition and accelerate, leading to sustained monthly increases of 5–6%.
• Recent Data Confirmation: The latest GST data confirms this resilience, with April to October FY26 inflows reaching about ₹13.89 lakh crore, up 9% from the same period last year.