Karnataka Govt Faces Rs 15K Crore Revenue Shortfall This Fiscal, Likely To Cut Budget Size
Barring revenue from excise (liquor), remaining three revenue-earning departments—commercial tax, transport and stamps and registration - are set to miss their targets by around 10%.
Published : February 16, 2026 at 2:37 PM IST
Bengaluru: The Karnataka government is staring at a revenue shortfall of around Rs 15,000 crore from its own sources for the current fiscal year due to multiple factors.
According to the Finance Department's data, as of February 10, the government has collected Rs 1.54 lakh crore revenue (in taxes) against its budgetary estimates of Rs 2.09 lakh crore for the current fiscal.
With just one and a half months remaining for the fiscal year to end, the government now faces the herculean task of collecting Rs 53,000 crore, which the finance department officers said is mostly unlikely.
"It is a difficult task but we are doing our best to at least meet the budget targets if not exceed them," said an official from the Finance Department.
Barring revenue from excise (liquor), the remaining three revenue-earning departments—commercial tax, transport and stamps and registration - are all set to miss their targets by around 10 percent, data suggests.
By the end of January month, the revenue from the excise department stood at Rs 33,371 crore versus the target of Rs 40,000 crore. With average revenue from liquor sales exceeding Rs 3,000 crore every month, the Government expects to exceed the target by around Rs 500 crore.
The revenue from commercial taxes stood at Rs 90,229 crore (Rs 1.2 lakh target) and that of stamps and registration Rs 20,5000 crore (Rs 28,000 crore). The transport department has collected Rs 10,594 crore against the target of Rs 15,000 crore.
Among other factors, the primary reason for the commercial tax revenue shortfall is being attributed to the mid-year GST rationalisation effected by the Centre, which restructured the four-tier slabs ranging from five percent to 28 percent into a two-slab structure of five percent and 18 percent. "The state government is going to lose around Rs 9,000 crore on this count alone," Chief Minister Siddaramaiah said on many occasions.
Similarly, the slowdown in the real estate sector also hit the state's revenue from the stamps and registration. Ongoing technical glitches in the e-khata portal, which resulted in fewer property transactions also contributed to the revenue loss, government sources said.
Missed Targets May Result In Cut In Budget Size In 3 Consecutive Years
Meanwhile, steep shortfall in revenue from its own sources has left the state government no option but to cut down the budget size for the current fiscal at least by 6-7 percent, bringing down the estimated budget outlay from Rs 4.09 lakh to Rs 3.80 lakh crore. In the past two fiscal years, the government had revised down its budget outlay after falling short of revenue mop-up.
In 2023-24, the budget outlay was cut down from Rs 3.27 lakh crore to Rs 3.17 lakh crore and in 2024-25 to Rs 3.65 lakh crore from 3.71 lakh crore.
According to experts, the continuing shortfall in revenue mop-up suggests that the state's revenue sources have reached a saturation point and the state government must cut down its expenditure.
Ramanath from the liquor industry said, "Even though the state government has been estimating a minimum of 10 percent growth in revenue from all the four departments in every budget, it is continuously falling short in realization or barely reaching the target. This suggests saturation in revenue earning departments except liquor. The revenue from liquor is growing but it is not an organic growth."
"The Government has been increasing the tax on liquor at every given opportunity, which has resulted in strong revenue growth," he added.
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