GST collections may witness a short-term dip in the months immediately following the launch of the overhauled GST 2.0 structure, the Central Board of Indirect Taxes and Customs (CBIC) has indicated.
"Expect some dip in GST collection for initial months, as taxes are paid through accumulated ITC, but festive demand will boost sales," said CBIC Chairman Sanjay Kumar Agarwal in an interview.
To ensure a smooth transition, the GST department is working with industry stakeholders to upgrade ERP and back-end systems, aiming for a glitch-free rollout when the new structure takes effect on September 22. Businesses have been given a two-week window to align their software and compliance mechanisms.
The reforms, announced by Finance Minister Nirmala Sitharaman, simplify India's indirect tax regime by collapsing the earlier four-slab system into two primary rates of 5% and 18%, along with a new 40% slab for sin and luxury goods like cigarettes, gutkha and aerated drinks. Additional levies above 40% have been abolished, lowering the tax incidence on mid-size and big cars.
While the government estimates a revenue loss of Rs 48,000 crore-lower than economists' projections of Rs 1 lakh crore-the rationalisation is expected to boost consumption, ease inflation, and strengthen compliance. Citi has projected that retail inflation could drop by up to 1.1 percentage points if businesses pass on the rate cuts to consumers.
Meanwhile, certain products such as apparel priced above Rs 2,500 and coal will face higher tax rates, even as most consumer goods-including appliances, packaged food, and daily-use products-benefit from reductions.
With the festive season starting on Navratri (September 22), policymakers and industry experts expect pent-up demand to drive sales and offset the short-term dip in revenues. The government is positioning GST 2.0 as a reform that not only simplifies the tax structure but also strengthens MSME competitiveness, consumer welfare, and supply chain efficiency.
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