New Delhi [India], January 11 : The Karnataka government has called on the Union Government, in the forthcoming Union Budget 2026-27, to ensure revenue protection for States post-GST rationalisation, share excise duty and cess on pan masala and tobacco products, release pending Central dues under flagship schemes such as the Jal Jeevan Mission, and strengthen funding for rural employment, agriculture, and social protection.
The State government made these demands during the pre-Budget consultations chaired by Union Finance Minister Nirmala Sitharaman in New Delhi on Saturday.
Karnataka's Revenue Minister Krishna Byre Gowda represented his state at the meeting with the Union finance minister.
As is the convention, the Budget for 2026-27 will be presented on February 1.
Presenting the State's views, the Karnataka Minister highlighted that while it remains a major contributor to national economic growth, its fiscal space has significantly narrowed due to GST rate rationalisation, rising social sector commitments, climate-related shocks, and rapid urbanisation. The State underlined that responsibilities of States have expanded faster than their revenue base.
Karnataka flagged a sharp slowdown in GST revenue growth following rate rationalization in 2025, resulting in a revenue shortfall. The State sought a revenue protection and compensation mechanism for States, akin to the earlier GST Compensation Cess.
It also demanded a 50:50 sharing of excise duty on tobacco products and cess on pan masala, arguing that States bear the health and enforcement costs while the proceeds remain outside the divisible pool.
On the Jal Jeevan Mission, Karnataka pointed out that it has released Rs 24,598 crore against a Central release of Rs 11,786 crore, including advances to prevent disruption of works, and sought urgent release of the pending Central share
Raising concerns over rural employment, Karnataka sought reconsideration of the shift from the demand-driven MGNREGA to the allocation-based G-RAM-G scheme, noting that it has reduced effective employment days and imposed an additional fiscal burden on the State.
In agriculture, Karnataka proposed the implementation of a Price Deficiency Payment Scheme under PM-AASHA for eight crops, maize, soybean, mango, chilli, onion, tomato, turmeric, and ginger, and sought an additional allocation for 2026-27.
The State also demanded an upward revision in the Central contribution for frontline workers, seeking monthly honorariums of Rs 8,000 for Anganwadi and ASHA workers and Rs 5,000 for cooks and helpers. It further called for expansion of coverage and enhancement of pension amounts under the National Social Assistance Programme.
Karnataka reiterated its request to declare the Upper Bhadra Project as a National Project and sought release of Rs 5,300 crore in Central assistance as announced earlier.
Union Minister for Finance and Corporate Affairs Nirmala Sitharaman on Saturday chaired the meeting on pre-Budget consultation with States and Union Territories (with Legislature) for the forthcoming Union Budget 2026-27.