The central government’s revenue loss from the recent GST rate cuts is projected to be only around Rs 3,700 crore in FY26, cushioned by stronger consumption and higher tax collections, according to a report by the State Bank of India (SBI).As per news agency ANI, the report noted that while the government, based on FY24 estimates, had earlier projected a gross revenue loss of Rs 93,000 crore from GST rationalisation, higher collections reduced the net loss to Rs 48,000 crore.
For FY26, SBI expects the gross loss to rise to Rs 1.11 lakh crore, but with buoyant consumption and better compliance, the net loss is seen sharply lower at Rs 25,794 crore, including Centre and states’ share.For the Centre alone, the loss is significantly smaller. Using the FY24 baseline, the Centre’s share was Rs 6,960 crore, while for FY26 it is projected at Rs 3,740 crore, SBI said. “Based on the trend growth and consumption boost, we expect Rs 3,700 crore revenue loss in GST,” the report added, noting the fiscal impact is just about 1 basis point of the deficit.SBI highlighted that past GST rate cuts have often led to additional revenues of nearly Rs 1 trillion. It argued the latest reforms should be viewed as structural rather than a temporary stimulus, as the simplified framework is expected to reduce compliance burdens, widen the tax base, and encourage voluntary compliance.On inflation, the report estimated that reducing GST rates on around 295 essential items, many now under 5% or Nil, would lower CPI inflation in this category by 25–30 basis points in FY26. Further, rationalisation in services is expected to ease CPI by another 40–45 basis points, taking the overall moderation to 65–75 bps over FY26–27.Experts said the reforms, part of GST 2.0 approved by the GST Council on September 3, reflect a shift to demand-led growth. Essentials will now attract 5%, other goods 18%, and luxury/sin items 40%. As per news agency PTI, HSBC Global Research said the combination of GST changes, income tax cuts and benign inflation will create conditions for “sustained growth,” with GDP rising by up to 0.2 ppt.Jefferies said the GST cuts would help both consumers and companies at a time of weak demand, while Kotak Institutional Equities noted they could revive FMCG consumption. Standard Chartered said the GST reduction could lower inflation by 40–60 bps annually, while adding 0.1–0.16 ppt to GDP growth.Overall, analysts expect the reforms to spur consumption in sectors including consumer goods, retail, automobiles, cement, insurance, and renewables, while also giving a push to private capex after years of sluggishness.
