CHENNAI: The interim budget of the Tamil Nadu government for the year 2026-27 has revealed a shortfall of Rs 14,355 crore in the realisation of the target fixed for State’s Own Tax Revenue (SOTR) for 2025-26. However, the state government, in its medium-term fiscal plan for 2026-27, indicated that past shortfalls will be addressed by strengthening compliance and administration.
The SOTR target for 2025-26 was estimated to be Rs 2,20,895 crore. However, the actual realisation in the SOTR in the Revised Estimates for 2025-26 stood at Rs 2,06,540 crore, thus leaving an SOTR gap of Rs 14,355 crore, which is considered a moderate shortfall.
The interim budget for 2026-27 attributes the shortfall primarily to lower-than-expected GST collections. Since GST constitutes the largest share of Tamil Nadu’s own tax revenue, even a moderate slowdown in GST growth has a disproportionate impact on overall SOTR. The budget explicitly noted that the reduction is mainly attributable to the decline in GST receipts.
When asked about the shortfall in realising the target fixed for SOTR during 2025-26, a senior official told TNIE that the budget documents have dealt with this development and reasoned it out. He said the budget also indicated measures for setting right this shorfall.
The SOTR for 2026-27 is estimated to reach Rs 2,29,579 crore — an 11% increase over the revised estimate for 2025-26. The interim budget said this taking into account both the positive impact of improved economic activity arising from trade deals with the US and the European Union, and the adverse impact of the GST rate rationalisation exercise conducted the previous year.
The interim budget also projected the SOTR for the next two financial years to be Rs 2,61,720.20 crore in 2027-28 and Rs 2,98,361.02 crore in 2028-29. The growth rates of SOTR are estimated to be 14% in 2027-28 and 2028-29. The shortfall also comes amid fiscal friction between the state and the union government. The interim budget refers to impacts from GST rate rationalisation, an unannounced IGST deduction, and reductions in certain fund transfers. While these may not directly reduce SOTR, they tighten overall fiscal space and complicate revenue management.