States’ revenue receipts set to cross Rs 44 lakh crore in FY27: CRISIL

Revenue receipts of 18 large Indian states are expected to grow 9-11 per cent year-on-year in fiscal 2027 and cross Rs 44 lakh crore, with higher GST collections and increased tax devolution from the Centre driving the improvement, according to a CRISIL Ratings analysis.

The 18 states covered in the analysis account for more than 90 per cent of India’s gross state domestic product (GSDP). Their aggregate revenue growth is expected to accelerate from an estimated 8 per cent in the previous fiscal, although gains across individual states are likely to vary depending on their revenue mix and spending commitments.

GST revenue

GST is expected to remain the main driver of the improvement. CRISIL expects states’ GST revenue to grow 12-13 per cent this fiscal, supported by resilient domestic consumption and continued strength in import-linked collections.

“We expect states’ GST revenue to rise 12-13 per cent, supported by resilient domestic consumption and robust import-linked collections,” said Anuj Sethi, senior director at CRISIL Ratings.

Also read: Gross GST collections rise 14.8 pc in August; net revenue up 8.3 pc

According to the analysis, elevated commodity prices, rupee depreciation and stable import volumes are expected to support integrated GST (IGST) collections from imports. GST 2.0, implemented in September 2025, is also expected to improve revenue buoyancy.

The strength in GST collections is already evident. State GST revenue rose 16 per cent year-on-year in the five months ended August 31, 2026, aided by nearly 30 per cent growth in IGST collections from imports of electronics, machinery, gold, fertilisers and other key goods.

CRISIL expects this pace to moderate in the second half of the fiscal as commodity prices stabilise and currency volatility eases.

GST a major share of states’ taxes

States' own taxes account for slightly more than half of their revenue receipts, with GST contributing around 40-45 per cent of own-tax revenue. Liquor and petroleum taxes are other significant sources.

Overall own-tax revenue is projected to grow 9-10 per cent in FY27, with GST providing most of the impetus.

Revenue from liquor sales is expected to increase 7-8 per cent, reflecting stable consumption and periodic revisions in duties and fees. Petroleum-tax revenue is projected to grow 4-5 per cent, driven mainly by higher volumes and pump prices.

Also read: GST on UPI MDR won’t affect small merchants, insists NPCI

States have so far largely refrained from cutting petroleum tax rates. Any reduction in rates in response to a further increase in crude oil and retail fuel prices could, however, affect the revenue outlook.

Other own-tax revenue, led by stamp duty collections, is expected to rise 6-7 per cent from a high base as growth in the real estate sector moderates.

Tax devolution to provide another boost

Tax devolution from the Centre is expected to be the second major driver of state revenue growth.

States receive 41 per cent of the Centre's divisible tax pool. Personal income tax accounts for the largest component of this pool, followed by corporate tax and the Centre's GST collections.

CRISIL expects tax devolution flows to states to increase 11-12 per cent in FY27. The increase is expected to be supported by a recovery in personal income-tax collections from the relatively low base created by last year's tax-slab restructuring, along with stronger nominal economic growth supporting indirect-tax collections.

“A double-digit increase in tax devolution will complement the GST-led improvement in state revenues,” said Aditya Jhaver, director at CRISIL Ratings.

The increase in untied revenues could provide states with greater fiscal flexibility, although the extent of the benefit will depend on individual states' revenue structures and expenditure commitments.

Grants, mining royalties to support revenue growth

Beyond tax revenues, grants-in-aid are expected to rise 6-7 per cent during FY27. CRISIL attributes the expected increase partly to higher allocations for urban and rural local bodies under the 16th Finance Commission framework, subject to performance-linked conditions, as well as increased funding for some centrally sponsored schemes.

Also read: GST enters year 10; revenue rises 14 pc to Rs 1.95 lakh cr in June

Non-tax revenue is projected to grow 9-10 per cent, with mining royalties expected to remain a key contributor. Stable mineral production, firmer prices and continued auctions of mineral blocks are likely to support collections.

State-wise performance likely to remain uneven

The improvement in aggregate state revenues is unlikely to be uniform, with outcomes depending on revenue composition, tax buoyancy and compliance with conditions attached to grants.

CRISIL's projections assume nominal GDP growth of around 13 per cent in FY27, compared with approximately 8.9 per cent in the previous fiscal.

Global uncertainty, changing consumption patterns and inflationary pressures remain key factors to watch. The fulfilment of conditions linked to grants could also affect the flow of funds to individual states.

Beyond the cyclical improvement in revenues, the ability of states to sustain the momentum will depend on broadening the tax base, improving tax compliance and strengthening collection efficiency.