FY26 GST Revenue Projected to Surpass Budget Goals, States to Benefit as per SBI Report

India’s Goods and Services Tax (GST) collections are projected to surpass expectations in the financial year 2025-26, according to a recent report by SBI Research. This optimistic forecast comes amid a significant restructuring of GST rates, which aims to streamline the tax system. The analysis suggests that the government will likely collect more revenue than initially anticipated in the Union Budget, driven by a new rate regime and historical trends indicating resilience in GST collections.

Positive Projections Amid Rate Restructuring

SBI Research’s latest analysis indicates that India’s GST revenue for FY26 is expected to exceed budgeted targets. The report highlights that this assessment aligns with growth rate assumptions shared by the GST Council. A key factor contributing to this optimism is the recent overhaul of GST slabs, which took effect in September 2025. The new structure features four categories: a 0% exempt slab, standard rates of 5% and 18%, and a 40% rate specifically for luxury and sin goods. This rationalization is anticipated to benefit most states throughout the financial year, with Maharashtra projected to see a 6% increase and Karnataka potentially experiencing a 10.7% rise in GST collections.

Historical Context and Revenue Stability

The report draws on historical data to support its projections. Previous adjustments to GST rates, particularly those made in July 2018 and October 2019, demonstrated that revenue collections typically stabilize and even accelerate following a brief transition period. Although a significant reduction in tax rates can initially lead to a temporary decline of about 3-4% month-on-month, the report notes that GST receipts generally recover with consistent monthly increases of 5-6%. This pattern has historically translated into additional revenues of nearly Rs 1 trillion, reinforcing the expectation of robust collections in the upcoming financial year.

Recent Collection Trends

Recent data on GST collections further underscores the resilience of the tax system. In October, gross GST receipts rose by 4.6%, reaching approximately Rs 1.95 lakh crore compared to Rs 1.87 lakh crore in the same month the previous year. All components of GST—Central-GST, State-GST, and Integrated-GST—recorded year-on-year growth, although there was a slight dip in cess revenue. For the period from April to October in the current financial year, GST inflows totaled around Rs 13.89 lakh crore, marking a 9% increase from Rs 12.74 lakh crore during the same timeframe last year. This upward trend in collections bodes well for the government’s revenue expectations moving forward.

Implications for State Revenues

The restructuring of GST rates is expected to have a positive impact on state revenues. SBI Research emphasizes that most states will emerge as net gainers following the rationalization of GST slabs. This is crucial for state governments, as increased GST collections can enhance their financial health and ability to fund public services. The report’s findings suggest that the benefits of the new rate structure will be felt across various regions, contributing to a more balanced economic landscape. As states adapt to the new GST framework, the overall outlook for fiscal stability appears promising, setting the stage for sustained growth in the coming years.

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