Geopolitical headwinds in the background of recently introduced tax changes would shape the Centre’s fiscal outlook for 2026-27. Despite pressure on tax revenues and subsidies, strong non-tax receipts and policy interventions may keep fiscal outcomes broadly on track.

As per the Controller General of Accounts (CGA) data, the Centre’s gross tax revenues (GTR) grew only by 3.7% in the first quarter of 2026-27. This was the result of subdued revenue performance of personal income tax (PIT) and Goods and Services Tax (GST), both of which were subjected to substantive modifications in 2025-26. In both cases, extensive rate rationalisation was undertaken. In the case of GST, there was a substantive rate reduction. The expectation was that while these reforms would entail an initial revenue sacrifice, subsequent expansion of the tax base would offset the revenue loss over time. PIT revenue growth in 2025-26 was only 0.037%, implying a buoyancy of zero. For the second half of 2025-26, GST revenue growth was 4.67%. The revenue reducing effect of these major tax interventions has continued in 2026-27. PIT shows a growth of 6.8% in the first quarter of 2026-27 while GST revenues showed a contraction of (-)11%.