GST Council Meet: States to remain net gainers despite rate rationalisation, say experts

New Delhi, Sep 3 While some states have raised concerns over possible revenue loss on Wednesday at the 56th meeting of the GST Council, new estimates suggest that states will remain net gainers under the current GST framework, even after a potential rejig in tax rates.

The SBI Research report has projected 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.

This optimism stems from the unique revenue-sharing structure of GST, where 50 per cent of all GST collections go directly to the states, and 41 per cent of the Centre’s share is also devolved to them.

This essentially means that out of every Rs 100 collected through GST, states eventually accrue around Rs 70.5, giving them a substantial share of the total tax pool.

Experts argue that even with some immediate revenue dips due to rate changes, the long-term gains -- driven by higher consumption and improved compliance -- will far outweigh any short-term losses.

The debate has gained momentum as eight opposition-ruled states -- Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal, and Karnataka -- have formally requested the Union government for compensation, citing concerns that rate rationalisation could lead to reduced revenue inflows.

However, historical evidence appears to favour rationalisation. The SBI report points to past rate changes in 2018 and 2019, which initially led to a small dip in collections but were followed by consistent revenue growth of 5–6 per cent month-on-month.

Even in a scenario where there's a temporary dip of around 3–4 per cent in monthly GST collections (roughly Rs 5,000 crore), the report estimates a swift rebound backed by rising consumption.

As the Council continues its deliberations over the next two days, industry players and consumers alike are closely watching for announcements.

The rate rationalisation, if approved, could potentially bring down prices of daily essentials and premium products alike, offering relief to households and giving a boost to consumption-led growth.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor