Union Budget 2026: Karnataka demands GST revenue protection, greater share in tobacco excise

The Karnataka government has called the Union Government to protect State revenues and clear pending Central dues in the upcoming Union Budget 2026–27. The demands were raised during the pre-Budget meeting chaired by Union Finance Minister Nirmala Sitharaman in New Delhi on Saturday.

Karnataka Revenue Minister Krishna Byre Gowda represented the State at the meeting. As per tradition, the Union Budget for 2026–27 will be presented on February 1.

The State said that while Karnataka is a major contributor to India’s economic growth, its financial space has become tight due to lower GST growth, higher welfare spending, climate challenges, and fast urban growth.

Add Zee Business as a Preferred Source

Why is Karnataka seeking revenue protection after the GST changes?

Karnataka said that GST rate changes in 2025 have slowed down its revenue growth. This has created a gap between income and spending. The State explained that its duties and public spending are rising faster than its income, ANI reported.

To solve this, Karnataka asked the Centre to create a revenue protection and compensation system for States. It suggested a system similar to the earlier GST Compensation Cess, which helped States manage losses during GST rollout.

The State said this support is important to keep basic services running smoothly.

Should states get a share in tobacco and pan masala taxes?

Karnataka also demanded a 50:50 sharing of excise duty on tobacco products and cess on pan masala.

The State said it spends heavily on healthcare and law enforcement linked to these products. However, the tax money collected from these products does not go into the divisible pool shared with the states. Karnataka argued that States should get a fair share of this revenue.

Why is Karnataka asking for pending Jal Jeevan Mission funds?

The State raised concerns about delayed Central funds under the Jal Jeevan Mission.

Karnataka said it has already released Rs 24,598 crore for water projects, while the Centre has released only Rs 11,786 crore so far. The State even paid advances to prevent work from stopping.

It asked the Centre to urgently release the pending amount so that drinking water projects can continue without delay.

What changes is Karnataka seeking in rural jobs and farming support?

Karnataka expressed concern over the shift from the demand-based MGNREGA scheme to the allocation-based G-RAM-G scheme. The State said this change has reduced the number of working days for rural workers and increased the financial burden on States.

In agriculture, Karnataka proposed a Price Deficiency Payment Scheme under PM-AASHA for eight crops — maize, soybean, mango, chilli, onion, tomato, turmeric, and ginger. It also requested extra funds for the 2026–27 financial year to support farmers.

ALSO READ: FIIs likely to turn buyers as US-India trade deal hopes, earnings outlook improve

What other demands did Karnataka raise before the budget 2026?

The State asked the Centre to increase monthly payments for frontline workers. It proposed Rs 8,000 per month for Anganwadi and ASHA workers and Rs 5,000 for cooks and helpers.

Karnataka also called for wider coverage and higher pension amounts under the National Social Assistance Programme.

In addition, the State repeated its request to declare the Upper Bhadra Project a National Project. It also sought the release of Rs 5,300 crore in Central support that was announced earlier.

The Centre said it will review all proposals as part of the Budget preparation process.

With inputs from agencies.