The State Bank of India (SBI), in its latest research report, has said that the government’s recent reforms in the Goods and Services Tax (GST) structure will cause only a minimal revenue loss of ₹3,700 crore, even as the annualised fiscal impact is estimated at ₹48,000 crore.
GST Rate Cuts To Cost Govt ₹3,700 Cr, But Boost Growth: SBI Report
Simplified tax slabs, lower inflation, and sectoral efficiencies expected despite minimal revenue loss
According to The Hindu, the report noted that the changes, finalised at the 56th GST Council meeting, will not affect the fiscal deficit and are likely to deliver long-term benefits by boosting consumption and lowering inflation.
The GST Council has replaced the earlier four-tier structure (5%, 12%, 18% and 28%) with a simplified two-tier regime — a standard rate of 18% and a reduced rate of 5%, along with a 40% de-merit rate on selected sin goods.
According to SBI, as cited in PTI, the weighted average GST rate, which stood at 14.4% in 2017 at the time of GST’s launch, is expected to fall further to 9.5%. The rationalisation has reduced taxes on around 295 essential items, which could lower CPI inflation in that category by 25–30 basis points in FY26, and overall inflation by 65–75 basis points by FY27.
The banking sector is also expected to benefit significantly from the move, with the report pointing to “meaningful cost efficiencies” arising from the new tax framework.
Published At: