Eight opposition-ruled states have demanded revenue protection or compensation , saying that the average revenue loss is expected at about `1.5-2L crore

PTI New Delhi

States will remain "net gainers" of the proposed GST rate rationalisation exercise with their GST revenues, including devolution, estimated to be over Rs 14.10 lakh crore this fiscal, according to an SBI Research report released on Tuesday.

It said that, as was evidenced in the earlier exercise of GST rate rationalisation in 2018 and 2019, an immediate reduction in rates can cause a short-term dip of around 3-4% in month-on-month collections (roughly Rs 5,000 crore, or an annualised Rs 60,000 crore), revenues typically rebound with sustained growth of 5-6% per month. The Centre has proposed a rationalisation of rates and slabs under the GST by moving to a two-tier tax structure of 5 and 18%, and a 40% rate for a select few items.

Currently, GST is a four-tier structure of 5, 12, 18, and 28%. Also, a compensation cess in the range of 1 to 290% is levied on luxury and demerit goods. However, 8 opposition-ruled states have demanded revenue protection or compensation, saying that post the rationalisation, the average revenue loss is expected at about Rs 1.5-2 lakh crore. SBI Research, in its report released on August 19, 2025, had said the average annual GST revenue loss to the Centre and states could be about Rs 85,000 crore. In its report released on Tuesday, SBI Research, however, said that in FY26 as well, states will remain net gainers from GST collections, even under the proposed rate rationalisation.

This is because, first, GST is shared equally between the Centre and states, with each receiving 50% of the collections. Second, under the mechanism of tax devolution, 41% of the Centre's share flows back to states. Taken together, about 70% of total GST revenues go to states.