  We prove a blow-up formula for the generating series of virtual
$\chi_y$-genera for moduli spaces of sheaves on projective surfaces, which is
related to a conjectured formula for topological $\chi_y$-genera of G\"ottsche.
Our formula is a refinement of one by Vafa-Witten relating to S-duality. We
prove the formula simultaneously in the setting of Gieseker stable sheaves on
polarised surfaces and also in the setting of framed sheaves on $\mathbb{P}^2$.
The proof is based on the blow-up algorithm of Nakajima-Yoshioka for framed
sheaves on $\mathbb{P}^2$, which has recently been extend to the setting of
Gieseker $H$-stable sheaves on $H$-polarised surfaces by Kuhn-Tanaka.

Algebraic Geometry