Reduction in K’taka’s tax revenue share is attack on federal structure: Siddaramaiah
Bengaluru: The Union government’s attempt to further reduce Karnataka’s rightful share of tax revenue is not just anti-Karnataka but also a direct attack on the federal structure enshrined in the Constitution, stated Chief Minister Siddaramaiah.
Siddaramaiah said: “Reports indicate that the NDA government is preparing to recommend reducing Karnataka’s tax share from 41 per cent to 40 per cent through the Finance Commission. Since Prime Minister Narendra Modi took office as Prime Minister, the Centre’s policies have consistently curtailed and weakened the Constitutional rights of states.”
The Finance Commission, which is responsible for fair distribution of tax revenue collected by states, is now being used as a tool to suppress states’ rights. This is a dangerous trend, pushing states into a dependent position where they must rely on the Centre’s discretion – a move we cannot accept, he stated.
Decentralisation strengthens democracy; centralisation breeds authoritarianism. As India marks eight decades of democracy, it is alarming that the Union government is treating states as mere subordinates instead of empowering them. This is unacceptable, he said.
Every year, the Karnataka government remits approximately Rs 4 lakh crore collected from Kannadigas to the Union government. However, the state receives back only 15 paise per rupee. Due to the 15th Finance Commission reducing Karnataka’s tax share from 4.713 per cent to 3.64 per cent, the state has lost Rs 68,775 crore over the past five years, he alleged.
Even though the 15th Finance Commission’s term ends next year, the Union government has yet to release Rs 5,495 crore in special grants recommended by the Commission, along with an additional Rs 6,000 crore in centrally sponsored grants for Karnataka, he said.
Moreover, the Union government has consistently allocated Karnataka’s funds below the Commission’s recommendations. In the financial years 2021-22, 2022-23, and 2023-24, grants for urban local bodies were reduced by Rs 1,311 crore, and Rs 775 crore was cut from Panchayat Raj institutions. In 2022-23 and 2023-24, health grants were slashed by Rs 826 crore, and Rs 340 crore was cut under the State Disaster Response Fund (SDRF), Siddaramaiah stated.
In total, Rs 3,300 crore remains unpaid, and the special grants recommended for 2024-25 and 2025-26 must be released immediately, he demanded.
He appealed: “To compensate for revenue losses due to GST implementation, the GST Compensation Cess was introduced. However, even though compensation payments stopped in July 2022, the Union Government continues to collect the cess until 2026. Instead of this, states should be allowed to levy additional State GST (SGST) to recover revenue losses.”
At least half of the taxes collected in the state must be returned to Karnataka. Additionally, the Constitution must be amended to include non-tax revenue in the divisible tax pool for fair allocation, he said.
“The Congress Government in Karnataka, through Guarantee Schemes and welfare programmes, has earned the trust of the people. However, the Union government appears intent on discrediting it. To achieve this, it is denying Karnataka its rightful tax share and grants, pushing the state’s finances into crisis. But the state government has the strength and resolve to counter such oppressive measures. I strongly believe the people of Karnataka see this injustice for what it is,” he emphasised.
Siddaramaiah warned, “If appeals and negotiations fail, we will not hesitate to take to the streets and fight alongside the people.”