“Finance Ministry Dismisses Karnataka’s Claims of Tax Distribution Discrimination”

The Finance Ministry has issued a rebuttal to the Karnataka government’s allegations of discrimination in the distribution of central taxes, dismissing them as incorrect and misleading. This response comes shortly after the state’s Congress party staged a protest in the national capital.

In a statement, the Finance Ministry highlighted several inaccuracies in the claims made by the Karnataka government, including factual errors, false monetary assertions, and selective presentation of losses without acknowledging the gains accrued during the 15th Finance Commission (FC) period.

The Ministry argued that Karnataka received over Rs 1.5 lakh crore in tax devolution during the 14th Finance Commission award period spanning from 2015-16 to 2019-20. Additionally, under the 15th FC, the state has already received Rs 1.29 lakh crore with two years remaining in the current period. The interim budget for 2024-25 estimates a further release of Rs 44,485 crore, bringing the total to Rs 1.74 lakh crore over five years.

The Ministry emphasized that despite challenges posed by the pandemic, which impacted central revenues, Karnataka is slated to receive significantly more in devolution during the first five years of the 15th FC period compared to the preceding 14th FC period.

Regarding the allegation of increasing cess and reducing the state’s revenue share, the Finance Ministry clarified that a substantial portion of cess collection consists of GST compensation cess, which is entirely allocated to states.

Furthermore, the Finance Minister refuted claims of substantial dues in GST compensation, asserting that Karnataka’s statement of Rs 1.65 lakh crore due as GST compensation is blatantly false. The Minister emphasized that the compensation arrangement under the GST regime was designed for a five-year period as per the GST (Compensation to States) Act, 2017.

The rebuttal from the Finance Ministry comes in response to Karnataka Chief Minister Siddaramaiah’s criticism of the 15th Finance Commission’s devolution formula, alleging injustice to the state.