New Delhi, Sep 4 (IANS) The sweeping changes in Goods and Services Tax (GST) rates announced by the government may have only a minor impact on public finances, with the fiscal burden on the Centre expected to be just Rs 18,000 crore, according to a report by global brokerage Bernstein on Thursday. This amounts to only 0.05 per cent of India’s projected GDP for FY26, the report said. On September 3, the government unveiled major GST reforms, reducing the number of tax slabs and lowering rates on a wide range of goods. From daily-use FMCG items to cars, white goods, and insurance, most products are set to become cheaper from September 22.

Analysts believe these measures will stimulate demand, improve tax compliance, and give a strong push to consumption-led growth. Bernstein’s latest India Strategy Note highlights that while the reforms will lead to a short-term revenue hit, the overall impact on the economy remains limited. The brokerage estimates a revenue loss of Rs 79,600 crore due to rationalising the 12 per cent slab to 5 per cent, and another Rs 1.12 lakh crore from scrapping the 28 per cent slab. These losses will be only partially offset by gains of Rs 700 crore from the 12 to 18 per cent shift and Rs 15,000 crore from moving certain items from 28 to 40 per cent.

Taking into account these changes, the combined revenue loss for the Centre and states is expected to be around Rs 1.57 lakh crore. The Centre’s share comes to about Rs 74,000 crore. Bernstein further assumes a 5 per cent cut in capital expenditure, worth Rs 56,000 crore, to balance the revenue shortfall. As a result, the actual fiscal burden for the Centre narrows to Rs 18,000 crore. Meanwhile, HSBC in a separate report said the gross revenue loss from the tax cuts could be around $10.8 billion based on the FY24 consumption base.

Revenues redirected from the compensation cess into the new 40 per cent GST bracket could fund nearly $5.2 billion of that loss, leaving a net shortfall of $5.6 billion, or 0.16 per cent of GDP. Scaling this to the FY26 base, HSBC estimates a revenue loss of Rs 570 billion, which would still equal only 0.16 per cent of GDP over a year. Given that only half the fiscal year is left, the fiscal implication for FY26 would be around 0.1 per cent of GDP. Both reports suggest that while GST reforms will lead to some revenue loss for the government, the long-term benefits of higher consumption and stronger compliance will outweigh the short-term fiscal hit.