Daijiworld Media Network- New Delhi

New Delhi, Sep 5: The central government’s revenue loss from the recent Goods and Services Tax (GST) rate rationalisation will be around Rs 3,700 crore in FY26, according to a report by the State Bank of India (SBI). The impact has been cushioned by strong consumption trends and higher revenue collection, the report added.

Taking FY24 as the baseline, the government had initially estimated a gross loss of Rs 93,000 crore from GST rate reductions. After adjusting for extra collections, the net loss was brought down to Rs 48,000 crore.

For FY26, SBI projects the gross revenue loss to rise to Rs 1.11 lakh crore. However, with buoyant consumption and higher tax revenues, the net loss is expected to decline sharply to Rs 25,794 crore — including the Centre and states’ share. Of this, the Centre’s share for FY26 is pegged at Rs 3,740 crore, significantly lower than Rs 6,960 crore in FY24.

“Based on trend growth and consumption boost, we expect Rs 3,700 crore revenue loss in GST,” the report noted, highlighting that the fiscal deficit impact would be just about 1 basis point.

The report also underlined that GST rate cuts in the past have actually generated additional revenues of nearly Rs 1 trillion, pointing out that rationalisation must be seen as a structural reform rather than a short-term demand stimulus. Simplified rates are expected to ease compliance, widen the tax base and encourage voluntary compliance in the long run.

On inflation, SBI stated that rate cuts on nearly 295 essential items — with rates brought down from 12 per cent to 5 per cent or nil — are likely to reduce CPI inflation in this category by 25-30 basis points in FY26. Rationalisation of GST on services could further lower CPI inflation by another 40-45 basis points.