New Delhi, July 24 (IANS). State Bank of India (SBI)’s research report on Friday said that by combining the states’ share in GST collection and Basic Excise Duty (BED) in the financial year 2026-27, the states are expected to get a net additional benefit of about Rs 1.43 lakh crore as compared to the financial year 2025-26.
The report said that in the coming time, there may be a rise in GST collection again and its annual growth is expected to be in the range of 8-9 percent. According to the report, the recent slowdown in the pace of GST collection is mainly due to rate rationalization, which was already anticipated.
Under the revised tax system, Compensation Cess has been abolished and Additional Excise Duty (AED) has been implemented. After this, the total share of the states from GST and Basic Excise Duty is estimated to increase from about Rs 17.7 lakh crore in the financial year 2025-26 to about Rs 19.1 lakh crore in the financial year 2026-27.
Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor of SBI, said that the size of the total revenue share has increased and the states will directly benefit from it.
The report said that if a 20 percent increase in basic excise duty is assumed compared to financial year 2025-26 and the entire additional amount is considered as Additional Excise Duty (AED), then its estimated value will be Rs 35,874 crore.
According to the report, in the old system, the states used to get this entire amount as compensation cess, but in the new system, the states will get only 41 percent of the AED, i.e. Rs 14,708 crore. On this basis, states see a hypothetical loss of about Rs 21,000 crore in the financial year 2026-27, but the report says that this amount remains much less when divided among 28 states.
The report also said that states will get more revenue than before on demerit goods like betel and tobacco due to increase in GST from 28 percent to 40 percent. For example, earlier states would get Rs 19.74 on a taxable intra-state transaction of Rs 100, while in the new system it will increase to Rs 28.20.
Thus, states will get an additional benefit of Rs 8.46 per Rs 100 taxable transaction, while the Centre’s share will increase only by Rs 3.54. According to the report, this makes it clear that states are also getting substantial benefits from higher tax rates.
The SBI report also said that the perception that compensation cess was never a revenue of the central government is not correct. According to the report, this cess was imposed by the Central Government and was earlier recorded as tax revenue of the Centre. After this it was transferred to the GST Compensation Fund, from where payments were made to the states as grants.
–IANS
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