GST revenue in FY26 to exceed budget estimates, says SBI Research

The GST rate rationalisation, which was introduced in September 2025 provides two-tier structure of 5 percent and 18 percent, along with a 0 percent slab (exempt) and a new 40 percent demerit rate for luxury and sin goods.

The Goods and Services (GST) revenue for the Financial Year 2026 (FY26) will still be higher than budgeted collections, according to SBI Research.

The report projects that even after accounting for similar gains and losses across states following tax rationalisation measures, Goods and Services Tax (GST) receipts in FY26 are likely to surpass the government's budget estimates.

"We project GST revenue for FY26 will still be higher than budgeted GST collections," the report said.

The projections are based on the growth rate assumptions released by the GST Council, SBI Research noted.

The report added that most of the states experience positive gains for the entire fiscal post rationalisation.

The GST rate rationalisation, which was introduced in September 2025 provides two-tier structure of 5 percent and 18 percent, along with a 0 percent slab (exempt) and a new 40 percent demerit rate for luxury and sin goods.

In its observation, the report noted that Maharashtra is projected to gain by 6 per cent while Karnataka will gain by 10.7 percent.

"Thus, overall states will remain net gainers post GST rationalisation," the report added.
Evidence from earlier rounds of GST rate changes, such as those in July 2018 and October 2019, suggests that rationalisation does not necessarily weaken revenue collections.

Instead, the evidence points to a temporary adjustment phase followed by stronger inflows.
The report added that while an immediate reduction in rates can cause a short-term dip of around 3-4 percent month-on-month (roughly Rs 5,000 crore, or an annualized Rs 60,000 crore), revenues typically rebound with sustained growth of 5-6 percent per month.

"In past episodes, this dynamics is translated into additional revenues of nearly Rs 1 trillion," the report added.

GST collections in October, in gross terms, rose 4.6 percent to about 1.95 lakh crore compared to about 1.87 lakh crore in the same month last year, according to official data released on November 1.

In the month of October, collections of Central-GST, State-GST, and Integrated-GST rose year-on-year, while cess collections dipped year-on-year, data showed.

So far in 2025-26 - April-October - the GST collections rose 9 percent to about Rs 13.89 lakh crore, as against Rs 12.74 lakh crore in the same period last fiscal.