States Poised as Winners in GST Rate Overhaul

States are expected to benefit from the GST rate rationalisation, with GST revenues projected to exceed Rs 14.10 lakh crore. Despite an initial dip in collections post-rationalisation, revenue growth is anticipated. The proposed simplification aims to enhance compliance and broaden the tax base, contributing to economic efficiency.

The proposed GST rate rationalisation exercise is expected to benefit states, with projected revenues exceeding Rs 14.10 lakh crore, according to an SBI Research report released on Tuesday.

An immediate dip in revenue collection is anticipated post-rationalisation, but growth is expected to rebound at a rate of 5-6 per cent monthly. The government's plan includes streamlining the current four-tier GST structure into two tiers of 5 and 18 per cent, with a 40 per cent rate for select items.

The rationalisation aims to enhance the tax system's simplicity and efficiency, ultimately broadening the tax base and boosting long-term economic stability. Opposition states demand compensation for revenue losses, estimated at Rs 1.5-2 lakh crore, highlighting the complexity of implementing such fiscal changes.

(With inputs from agencies.)