GST rate rationalisation to profit Indian states in FY26: SBI Research

First, GST is shared equally between the central government and the states, with each receiving half of the collections. Second, under the mechanism of tax devolution, 41 per cent of the central government’s share flows back to the states, SBI Research said in a report on GST.

Taken together, this means that out of every ₹100 of GST collected, states ultimately accrue nearly ₹70.5.

SBI Research’s FY26 projections indicate that states are expected to receive at least ₹10 trillion in state GST plus ₹4.1 trillion through devolution, thereby making them net gainers.

The gains accrue even when the researchers did not take the additional consumption boost due to rate rationalisation.

“Evidence from earlier rounds of GST rate changes, such as those in July 2018 and October 2019, suggests that rationalization does not necessarily weaken revenue collections. Instead, the evidence points to a temporary adjustment phase followed by stronger inflows,” the SBI Research report noted.

“While an immediate reduction in rates can cause a short-term dip of around 3-4 per cent month on month (roughly ₹5,000 crore, or an annualized ₹60,000 crore), revenues typically rebound with sustained growth of 5-6 per cent per month,” it added.

ALCHEMPro News Desk (DS)