The Karnataka authorities Tuesday petitioned the Union authorities to advocate a pro-growth strategy when taxes are devolved to states by the sixteenth Finance Fee (FC). In a gathering with Union Finance Minister Nirmala Sitharaman, Chief Minister Siddaramaiah requested the Centre to scale back the ‘over-reliance on income-distance criterion’ and talk about Income Deficit Grants of their present format.
Karnataka’s share in tax devolution was diminished by 23 per cent from 4.713 per cent of the divisible pool of taxes underneath the 14th FC to three.647 per cent underneath the fifteenth FC. “A significant purpose for that is the over-reliance on the income-distance criterion, which obtained 45% weightage underneath the fifteenth FC. The State has requested the sixteenth FC that the weightage for income-distance needs to be diminished by 20 proportion factors and reallocated to fiscal contribution – which is the State’s share in nationwide GDP,” an announcement issued by the Chief Minister’s Workplace mentioned.
The income-distance criterion, one of many parameters used to allocate tax shares to states, refers back to the prioritisation of states with decrease per capita revenue by offering them with a bigger share within the divisible pool of taxes.
That is the second petition Karnataka submitted in June concerning the sixteenth FC, being applied from the 2026-27 fiscal. The primary was throughout the assembly between Siddaramaiah and Fee Chairman Arvind Panagariya on June 13. The Fee is anticipated to submit its report on the devolution of taxes and distribution of different tax shares to states by the top of October.
Income Deficit Grants of their present format, Siddaramaiah mentioned, “are in opposition to the ideas of fiscal self-discipline as proposed within the Fiscal Accountability and Price range Administration framework”. The grants needs to be redistributed amongst all states, Karnataka has urged within the assembly. These are among the many a number of suggestions made by Karnataka to handle the income loss suffered as a result of diminished share in taxes.
Siddaramaiah requested Sitharaman to incorporate the proposals from Karnataka “within the Union authorities’s Memorandum to the sixteenth Finance Fee as a growth-friendly devolution will be certain that all States are empowered to contribute their greatest to India’s growth journey.”
Karnataka has been at odds with the Central authorities over diminished share in taxes underneath fifteenth FC from 2021-22 to 2025-26. The particular grant of 11,495 crore for Karnataka advisable by the fifteenth FC was additionally not launched to Karnataka, as a result of which the state misplaced out on Central funds to the tune of Rs 80,000 crore.
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Final yr, Siddaramaiah, together with Cupboard colleagues, staged a protest in Delhi in opposition to the ‘injustice’ in tax devolution and demanded the discharge of varied grants assured by the Centre to the state.
Final yr, the Karnataka authorities petitioned the Supreme Courtroom in opposition to the Central authorities over the delay in releasing reduction for areas affected by the 2023 drought. The state estimated losses of Rs 35,162 crore as a result of crop loss in an space of 48 lakh hectares and sought Rs 18,174 crore in September 2023 to take up reduction works. In April 2024, the Centre launched Rs 3,454 crore to Karnataka.