Budget 2026 Watch: GST Reforms and Sectoral Expectations Ahead of February 1

Infographic outlining GST expectations from Budget 2026, including rate rationalization, simplification of compliance, and easing of input tax credit.

Budget 2026: Expectations

With just days remaining before the Union Budget 2026 is presented on 1 February, anticipation is building across industries, markets, and the professional community. Finance Minister Smt. Nirmala Sitharaman, set to present her ninth consecutive Union Budget—a historic first—will be closely watched for signals on growth priorities, fiscal consolidation, tax reforms, and policy continuity.

Global & Domestic Backdrop

Budget 2026 is being framed against a backdrop of heightened global uncertainty. Over the past year, trade tensions have intensified, particularly with India’s largest trading partner, the United States, following the imposition of steep tariffs on Indian exports. Simultaneously, volatility in global currency markets has exerted pressure on the Indian rupee.

Domestically, businesses are seeking GST rationalisation, simplification, and liquidity support, while salaried taxpayers are keenly awaiting any form of tax relief. Market participants are urging policy stability, especially in relation to capital gains taxation and transaction taxes.

Key GST & Sector-wise Expectations Ahead of Budget 2026

  • Measures to unlock working capital, especially through faster refunds and simplified compliance
  • Liberalisation of export-related GST rules, including refund mechanisms and LUT procedures
  • Administrative reforms aimed at ease of doing business, reduced litigation, and certainty in interpretation

MSME Sector

  • Strengthening MSME capacity at the last mile, including compliance facilitation under GST
  • Expanding access to affordable finance, including credit-linked tax incentives
  • Incentives or subsidies for MSME participation in industry associations and trade bodies

Consumer Goods & Retail

Industry expectations include:

  • GST incentives for healthier FMCG products and sustainable/eco-friendly packaging
  • Clear and neutral GST treatment of post-sale discounts to avoid disputes
  • Allowing Input Tax Credit (ITC) on input services in cases of Inverted Duty Structure (IDS) refunds

Insurance Sector

  • Introduction of a composite insurance licensing framework to improve scale and operational efficiency
  • GST rationalisation and tax incentives to enhance affordability and penetration
  • Gradual transition to a risk-based capital framework to strengthen solvency norms

Renewable Energy & Energy Security

  • Targeted GST relief and tax incentives for Battery Energy Storage Systems (BESS)
  • Policy support aligned with India’s long-term clean energy and energy security goals

Automotive & Electric Mobility

  • Clarification on Compensation Cess, particularly to ease working capital stress
  • Policy continuity to support EV adoption and supply chain localisation

E-Commerce

  • Industry calls for clearer GST provisions, especially on place of supply and TCS
  • Faster ITC refunds and reduced blockage of credits to support cash flows

Markets & Investments

  • Relief in long-term capital gains taxation
  • Strong pushback against any increase in securities transaction taxes

The Road to Budget Day

As India approaches one of the most closely watched Budgets in recent years, stakeholders across sectors are looking for targeted relief rather than sweeping changes, with a strong emphasis on GST simplification, certainty, and liquidity support.

All eyes now turn to 1 February, as policymakers balance fiscal prudence with growth imperatives in an evolving global and domestic economic landscape.

Disclaimer & Guidance
This update reflects industry expectations and policy discussions ahead of Budget 2026. For transaction-specific implications, professional advice should be sought.