Hyderabad: The Goods and Services Tax (GST) collections in Telangana have witnessed an increase over the past five years, doubling from ₹25,905 crore in 2020-21 to ₹50,343 crore in 2024–25. Despite this growth, the state government has expressed serious concerns over potential revenue losses estimated at nearly ₹7,000 crore annually due to the proposed GST rate rationalisation under the GST 2.0 reforms. While welcoming rate cuts aimed at easing the tax burden on citizens, the Telangana government has demanded that the Centre share a portion of the additional levy on sin and luxury goods with the states to offset revenue shortfalls.
However, the latest analysis by SBI Research highlights that the proposed GST 2.0 reforms will leave states as clear beneficiaries. The study projects that even after the compensation cess is phased out, the unique revenue-sharing design of the GST will ensure stronger inflows for state governments. The report says the GST collections are divided equally between the Centre and states, along with that 41 per cent of the Centre’s share is devolved back to the states. “Taken together, this means that out of every Rs 100 of GST collected, states ultimately accrue nearly Rs 70.5,” the report noted. The report projects that “States remain net gainers in FY26 even after the proposed GST rate rationalization.”
The SBI report says that Telangana was expected to get GST of Rs 42,075 crore in the current fiscal 2025-26, but it will get Rs 50,779 crore post GST rate rationalisation, the net gain of Rs 8,705 crore.
Data from the Comptroller and Auditor General of India (CAG) highlights consistent gaps between budget estimates (BE) and actual collections of Telangana. In 2020–21, the state had set a BE of ₹32,671.62 crore but realised only ₹25,905 crore, which was 79.29 per cent of the target. In the subsequent years, realisations improved: 97.10 per cent of BE in 2021–22, 99.29 per cent in 2022–23, and 91.28 per cent in 2023–24. However, in 2024–25, against a BE of ₹58,594.91 crore, the actual collections stood at ₹50,343.46 crore, translating to 85.92 per cent of the estimate.
Telangana was part of the Group of Ministers on rationalisation of GST on life and health insurance. The state supported exemption of individual insurance premiums and backed a broader rationalisation aimed at reducing slabs and lowering the tax incidence on essential goods. Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka, who attended the GST Council meeting in Delhi on Wednesday, said that while the Centre had assured that overall tax incidence on sin and luxury goods would remain unchanged, the design of the levy could adversely affect states.
He explained that certain goods currently face higher tax incidence than the proposed 40 per cent slab. If the present incidence continues, the excess levy would be imposed outside GST, becoming the Centre’s exclusive revenue. “States will lose heavily in such a situation. The additional income earned by the Centre should be shared with the states to mitigate the losses from GST rate cuts,” he urged.
Bhatti warned that Telangana is likely to lose at least ₹5,100 crore from rationalisation alone, and with other associated factors, the total impact could reach ₹7,000 crore, nearly 15 per cent of its GST collections. Since GST contributes about 39 per cent of Telangana’s own tax revenues, any fall in collections would strain finances, particularly because more than 80 per cent of the state’s revenues are tied to welfare schemes commitments.
The Deputy CM stressed that Telangana’s GST-to-GSDP ratio had slipped from 3.07 per cent in 2022-23 to 2.58 per cent in 2024–25, and rationalisation could push it down further. He reiterated that a proper compensation mechanism is essential to protect states’ finances and ensure continuity of welfare and development programmes.
He also noted that during GST’s rollout, states were assured of revenue protection for five years. However, Telangana’s GST revenues have grown at only 10 per cent CAGR up to 2024–25, compared to the 18 per cent CAGR under VAT earlier. “When states are denied taxation powers, mechanisms must exist to safeguard fiscal stability. Any tax reduction or exemption must genuinely benefit the poor and middle class, not erode states’ resources,” he said.
Telangana’s GST collections:
Finish. Year – Budget dear – Current –
2020-21: – Rs.32,671.62cr – Rs.25,905cr – 79.29%
2021-22: – Rs.35, 520.30cr – Rs.34,489.85cr – 97.10%
2022-23: – Rs.42,189.47cr – Rs.41,888.84cr – 99.29%
2023-24: – Rs.50,942.66cr – Rs.46,500.43cr – 91.28%
2024-25: – Rs.58,594.91cr – Rs.50,343.46cr – 85.92%
