Karnataka and Telangana have emerged as frontrunners in Goods and Services Tax (GST) revenue growth among larger states in India, following the GST rate rationalization implemented in September 2025. This growth defies earlier projections of significant revenue shortfalls and highlights the positive impact of the restructured tax system.

The Press Information Bureau (PIB) reported that Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Haryana collectively contribute over 40% of India's total GST revenue, underscoring their significance as major consumption and production hubs. Among these states, Karnataka and Telangana exhibited a notable 10% increase in GST collections in October 2025 compared to October 2024.

Specifically, Karnataka's GST revenue reached ₹14,395 crore in October 2025, up from ₹13,081 crore in the same month the previous year. Telangana's GST collections also saw an improvement, rising from ₹5,211 crore in October 2024 to ₹5,726 crore in October 2025.

Other states also experienced positive GST revenue growth, although at a more moderate pace. Gujarat recorded a 6% increase, with collections rising from ₹11,407 crore to ₹12,113 crore, while Tamil Nadu saw a 4% increase, from ₹11,188 crore to ₹11,588 crore. Maharashtra, the leading state in GST collection, recorded a 3% increase, with revenue growing from ₹31,030 crore to ₹32,025 crore. Odisha, Bihar and Uttar Pradesh, recorded growth rates of 5%, 3% and 2% respectively.

The GST rationalization, which began in September 2025, streamlined the tax slabs from four to two core rates: 5% and 18%. Additionally, a 0% exempt slab and a 40% rate specifically for luxury and sin goods were introduced.

According to an SBI Research report, most states are expected to benefit from this rationalization throughout the financial year. The report anticipates that GST revenue for FY26 will exceed budgeted collections, aligning with the GST Council's growth rate assumptions. Maharashtra is estimated to record gains of 6%, while Karnataka could see an even stronger improvement of 10.7%. The report stated, "overall states will remain net gainers post GST rationalisation,".

Past rate adjustments in July 2018 and October 2019 have shown that revenue typically stabilizes and accelerates after a brief transition period. While a sharp reduction in tax rates can initially lead to a temporary decline of around 3-4% month-on-month, GST receipts generally recover with consistent monthly increases of 5-6%.

Gross GST revenue collected for October 2025 was ₹1,95,936 crores, a 4.6% increase compared to ₹1,87,346 crores for the same month last year. The strong GST collections indicate sustained consumer demand during the festive season. The total GST inflows from April to October of the current financial year (2025-26) have reached approximately ₹13.89 lakh crore, a 9% increase from ₹12.74 lakh crore in the same period last year.

These figures suggest that the GST 2.0 regime has strengthened the tax engine, defying earlier concerns about potential revenue declines.