SBI Research Predicts Higher GST Revenue for India in FY26 Despite Rate Overhaul

SBI Research forecasts that India's Goods and Services Tax (GST) revenue for FY26 will exceed the amounts projected in the Union Budget, despite a major overhaul of the tax structure scheduled for September 2025. This new regime will consolidate GST slabs into four categories: 0% (exempt), 5%, 18% (standard tiers), and a 40% rate for luxury and so-called "sin goods."

The report suggests that this rationalization will benefit most states, with Maharashtra projected to see a 6% revenue gain and Karnataka an impressive 10.7% increase. Overall, states are expected to be net beneficiaries.

Historical data from previous GST rate adjustments in July 2018 and October 2019 supports this optimistic view. These adjustments, after an initial brief transition period, led to revenue stabilization and subsequent acceleration, rather than sustained decline. While a sharp reduction in tax rates can cause a temporary monthly decline of 3-4% (approximately Rs 5,000 crore, or Rs 60,000 crore annually), GST receipts typically recover with consistent monthly increases of 5-6%, historically adding nearly Rs 1 trillion in additional revenue.

Recent data reinforces this resilience. Gross GST collections in October 2025 rose 4.6% year-on-year to approximately Rs 1.95 lakh crore. For the period of April to October 2025, total GST inflows reached about Rs 13.89 lakh crore, marking a 9% increase from the previous year.

Impact: Higher GST revenue strengthens the government's fiscal position, potentially leading to increased spending on infrastructure and public services or enabling fiscal consolidation. This can boost overall economic growth and investor confidence, which may positively influence the Indian stock market. Rating: 7/10.

Difficult Terms: GST (Goods and Services Tax): A comprehensive indirect tax levied on the supply of goods and services in India. FY26 (Fiscal Year 2025-2026): The financial year running from April 1, 2025, to March 31, 2026. Union Budget: The annual financial plan presented by the Indian government detailing its estimated revenues and expenditures for the upcoming fiscal year. GST Council: The apex body responsible for guiding GST policies in India, comprising the Union Finance Minister and state finance ministers. Sin Goods: Products considered harmful or undesirable by society, such as tobacco and alcohol, which are often subjected to higher tax rates. Rationalisation: The process of making a system simpler, more efficient, or more logical, in this case, referring to the restructuring of GST tax slabs. Integrated-GST (IGST): A tax applied on inter-state transactions (between states) of goods and services, which is later apportioned between the central and state governments.