Overview: SBI Research’s View on FY26 GST Collections
Indian tax authorities are anticipated to collect more GST revenue in Financial Year 2026 (FY26) than what the budget originally projected. SBI Research has highlighted that even after accounting for the typical gains and losses across states due to policy changes, compliance shifts, and economic cycles, the overall GST mop-up is likely to surpass budget estimates. This forecast comes amid ongoing reforms, improved reconciliation between central and state levies, and steps taken to widen the tax base without dampening consumer demand.
What is Driving the Upside?
The SBI note points to several drivers that could sustain higher GST collections in FY26. Key factors include continued formalization of the economy, steady consumption in urban and semi-urban markets, and improved tax administration that reduces leakage and evasion. While revenue shocks from changes in state tax policies are possible, the net effect is expected to tilt toward a higher-than-budget revenue trajectory as compliance improves and revenue administration gains efficiency.
Policy and Compliance Enhancements
Enhanced data analytics, cross-state data sharing, and stricter enforcement against fake input tax credit claims are among the measures improving tax collection. The government’s push for seamless input tax credit reconciliation helps reduce revenue erosion and boosts overall VAT and GST receipts. These improvements are particularly impactful for sectors with historically higher evasion risk, such as manufacturing and services, where accurate credit and invoicing translate into more reliable mop-ups.
State-Level Variations and Their Net Impact
GST is a destination-based tax, with revenue distribution linked to state-level consumption. SBI Research notes that while some states could see short-term revenue volatility due to policy shifts or economic cycles, the aggregate impact is expected to remain positive for the center and the states collectively. The analysis considers potential shifts in inter-state tax dynamics, adjustments in compliance effort, and the possible stabilization of growth post-pandemic uncertainties.
Why FY26 Could Surpass Budgets Despite Uncertainties
Budget estimates are typically conservative, reflecting a cautious view of macroeconomic risks and implementation lags. If the economy maintains momentum and administrative reforms continue to bear fruit, GST collections may outpace these projections. The SBI Research assessment emphasizes that even if individual states experience uneven performance, the overall national GST revenue could exceed the budgeted target due to improved revenue realization, better compliance, and stronger taxable activity across sectors.
Implications for Fiscal Policy and Budgeting
Higher GST receipts have important implications for the fiscal roadmap. They can widen the room for capital expenditure, support social spending, or reduce the need for tax buoyancy adjustments in subsequent fiscal plans. However, analysts caution that reliance on short-term revenue spikes should be balanced with structural reforms to sustain growth and ensure predictable fiscal health. The SBI projection suggests a potential upside to the fiscal glide path, provided macroeconomic fundamentals stay on course and the administration continues to enhance tax compliance and administration.
What to Watch Going Forward
Markets and policymakers will be watching monthly and quarterly GST collection trends for FY26. Key indicators include GST mop-up growth rates, compliance metrics, and the distribution of revenues across states. Any deviations from the forecast could be attributed to external shocks, policy changes at the state level, or shifts in consumer demand. Still, the SBI Research view remains cautiously optimistic, underscoring a favorable trajectory for GST revenues in FY26 while acknowledging potential variances across states.
