FY26 GST Collections Expected to Exceed Targets; States to Benefit, Says SBI Research

New Delhi: According to a recent report by SBI Research, India's Goods and Services Tax (GST) collections are projected to surpass the government's budget estimates in FY26, even with the implementation of significant rate restructuring. The analysis indicates that states will remain net gainers following the GST rationalization, primarily due to the unique revenue-sharing structure and historical trends.

The report, released on November 2, 2025, anticipates that GST revenue for FY26 will exceed the budgeted GST collections, aligning with the growth rate assumptions shared by the GST Council. This optimistic outlook is largely attributed to the recent overhaul of GST slabs in September 2025, which introduced a streamlined rate regime. The new structure features four categories: a 0% exempt slab, standard tiers of 5% and 18%, and a 40% rate specifically for luxury and sin goods.

SBI Research suggests that most states are likely to benefit from this rationalization throughout the financial year. For instance, Maharashtra is estimated to record gains of 6%, while Karnataka could see an even stronger improvement of 10.7%. The report emphasizes that "overall states will remain net gainers post GST rationalisation".

The revenue-sharing structure of GST is designed to benefit the states. Fifty percent of all GST collections go directly to the states, and 41% of the Centre's share is also devolved to them. This means that states ultimately accrue around Rs 70.5 out of every Rs 100 collected through GST. 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.

Historical data supports the view that revenue does not weaken after rationalization. Previous rate adjustments, including those implemented in July 2018 and October 2019, showed that collections typically stabilize after a brief transition period and then accelerate. The analysis acknowledges that a sharp reduction in tax rates can trigger a short-lived decline of around 3–4% month-on-month, equating to roughly Rs 5,000 crore, or nearly Rs 60,000 crore on an annual basis. However, GST receipts generally recover with consistent monthly increases of 5–6%. In past episodes, this dynamic has translated into additional revenues of nearly Rs 1 trillion.

Collections in October rose 4.6% to about 1.95 lakh crore compared to about 1.87 lakh crore in the same month last year. For April to October of the current financial year (2025–26), GST inflows have risen 9% to approximately Rs 13.89 lakh crore, compared to Rs 12.74 lakh crore in the same period last fiscal.

While some states raised concerns over potential revenue loss at the 56th meeting of the GST Council, experts suggest that states will remain net gainers under the current GST framework, even after a potential rejig in tax rates. The SBI Research report projects that states are likely to receive at least Rs 10 lakh crore in State GST (SGST) collections in FY26, along with an additional Rs 4.1 lakh crore through tax devolution from the Centre.