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Karnataka Demands GST Protection, More Tobacco Tax Share in Budget Talks

The Karnataka government has presented its demands to the Union Finance Minister during pre-Budget consultations. The state highlighted a fiscal squeeze caused by GST rationalisation and seeks a revenue protection mechanism. Key demands include a 50% share of excise duty on tobacco products and the release of pending Central funds for schemes like Jal Jeevan Mission. The state also called for revised funding for rural employment, agriculture, and social welfare programs.

Key Points: Karnataka Seeks GST Revenue Shield, Tobacco Duty Share from Centre

  • GST revenue protection mechanism sought
  • 50:50 sharing of tobacco excise duty demanded
  • Urgent release of Jal Jeevan Mission dues
  • Reconsider shift from MGNREGA to G-RAM-G
3 min read

Karnataka seeks GST revenue protection, more tobacco excise duty sharing from Centre

Karnataka urges Centre for GST revenue protection, 50% tobacco excise share, and release of Jal Jeevan Mission funds in pre-Budget consultations.

"responsibilities of States have expanded faster than their revenue base - Karnataka Minister"

New Delhi, 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.

- ANI

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Reader Comments

P
Priya S
The demand for sharing tobacco and pan masala duty is spot on. Our state hospitals are filled with patients suffering from oral cancer and other diseases caused by these products. The state bears the healthcare cost, so it's only fair we get a share of that revenue. 👏
R
Rahul R
Jal Jeevan Mission point is serious. Karnataka has spent double from its own pocket compared to Central release? How is this sustainable? Water is a basic right. Centre must release funds immediately without any more delays.
A
Andrew M
While I understand the state's fiscal pressures, there has to be a limit to demands. Every state has unique challenges. A balanced approach is needed where prosperous states also contribute to national cohesion. The shift in rural employment scheme might need review, but blanket revenue protection could disincentivize efficient tax collection at the state level.
M
Meera T
ASHA and Anganwadi workers are the backbone of our rural health system. Rs. 8000 is still less, but a necessary increase. They work day and night for our mothers and children. Hope the Finance Minister listens this time.
K
Karthik V
Good to see focus on farmers. Price support for onion, tomato, chilli is crucial. Farmers in our region face huge losses every year due to price crashes. The Upper Bhadra project as a National Project is a long-pending demand. It will transform the dry districts.

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