States’ revenue growth to accelerate 9-11% as GST collections rise 16% in first five months: Crisil

Mumbai: Revenue growth of 18 large Indian states is expected to accelerate to 9-11 per cent this fiscal, supported by stronger Goods and Services Tax (GST) collections and higher tax devolution from the Centre, Crisil Ratings said in a press release on Tuesday.

The 18 states, which account for more than 90 per cent of India’s gross state domestic product (GSDP), are expected to see their combined revenue cross Rs 44 lakh crore in fiscal 2027, compared with an estimated growth of around 8 per cent last fiscal.

GST is expected to be the key driver, with states’ GST revenue projected to increase 12-13 per cent during the fiscal.

Read more: India’s jute industry set for turnaround as sales volumes seen rising 15%, margins improve: Crisil Ratings

“We expect states’ GST revenue to rise 12-13%, supported by resilient domestic consumption and robust import-linked collections. Elevated commodity prices, rupee depreciation and stable import volumes should sustain IGST collections from imports, while GST 2.0, implemented in September 2025, should improve revenue buoyancy,” Anuj Sethi, Senior Director, Crisil Ratings, said.

The momentum is already visible, with states’ GST revenue rising 16 per cent year-on-year during the five months ended August 31, 2026. Integrated GST collections from imports grew nearly 30 per cent during the period, supported by imports of electronics, machinery, gold, fertilisers and other key goods. Crisil, however, expects the pace to moderate in the second half as commodity prices stabilise and currency volatility eases.

Read more: Nearly 40% of India’s coal power plants running critically low on fuel, data showTax devolution from the Centre is expected to be the second major driver, rising 11-12 per cent this fiscal.

“A double-digit increase in tax devolution will complement the GST-led improvement in state revenues. We expect devolution flows to grow 11-12% as personal income-tax collections rebound from the low base created by last year’s tax-slab restructuring, while stronger nominal economic growth supports indirect-tax collections,” Aditya Jhaver, Director, Crisil Ratings, said.

Among other own-tax streams, revenue from liquor sales is expected to grow 7-8 per cent, while petroleum-tax revenue is projected to rise 4-5 per cent. Other own-tax revenue, led by stamp duty collections, is expected to increase 6-7 per cent. Overall, states’ own-tax revenue is projected to grow 9-10 per cent.

Crisil Ratings said grants-in-aid are expected to rise 6-7 per cent, while non-tax revenue, driven largely by mining royalties, could grow 9-10 per cent.

The projections assume nominal GDP growth of around 13 per cent in fiscal 2027. Crisil said global uncertainty, inflationary pressures, changing consumption patterns and compliance with grant-related conditions remain key factors to watch.