SBI Research sees states as 'net gainers' from GST 2.0 despite revenue loss anxiety

Amid fears of revenue loss due to the GST overhaul, a latest SBI research report says that the states will remain ‘net gainers’.

In the report released on Tuesday, the SBI Research said, “States are expected to receive at least ~ Rs 10 lakh crore in SGST plus Rs 4.1 lakh crore through devolution thereby making them net gainers. The gains accrues even when we do not take the additional consumption boost due to rate rationalization (At 9.5% effective GST rate, this translates into a revenue gain of Rs 52,000 crore; Rs 26,000 crore each to Centre and States)…when included the gains are even higher… Thus, even under the conservative scenario of only revenue loss and no gain, states emerge as net gainers…..”

Several states such as Karnataka and West Bengal have voiced concerns around loss of revenue due to the GST rejig that aims to introduce two slab model. The SBI Research data shows that for every Rs 100 GST collected, “states ultimately accrue nearly Rs 70.5 i.e., approximately 70% of total GST revenues.”

The report underscores the essence of federalism enshrined in the Constitution of India behind the GST framework. “The institutional framework of fiscal federalism embedded in the Constitution guarantees this outcome, maintaining the status quo in State finances while enabling the Centre to pursue reforms that simplify the tax structure, reduce compliance burdens & enhance efficiency,” the report further said.