Nirmala Sitharaman Calls Karnataka's Claims On Devolution 'Mischievous, Misleading'
Sitharaman's team refuted discrimination claims, adding that share of each state in the divisible pool of revenues fluctuates from commission to commission.
In response to Karnataka's 'Chalo Delhi' protest at the capital, Union Finance Minister Nirmala Sitharaman said that claims raised by the state had "factual errors, false monetary claims, misleading statements, and selective mention of certain losses allegedly suffered".
Karnataka has now joined Kerala, Telangana and Tamil Nadu in protests against the current sharing of taxes and grants to southern states. The debate comes with the recent formation of the 16th Finance Commission, which will be headed by Arvind Panagariya, former vice chairman of NITI Aayog. The commission is expected to make its recommendations available by Oct. 31, 2025, covering an award period of five years commencing April 1, 2026.
Karnataka Revenue Minister Krishna Byre Gowda told NDTV Profit that the state has missed out on an estimated Rs 62,098 crore of revenue on account of tax devolution, projected revenue prior to GST rollout, and rising cess and surcharges.
In a press conference and clarification on Wednesday, Sitharaman's team refuted discrimination claims, adding that the share of each state in the divisible pool of revenues fluctuates from commission to commission, following consultations with state governments.
"During the 14th FC’s five-year award period (FY16 to FY20), Karnataka received Rs 1,51,309 crore as tax devolution. However, in the first four years of the current FC (15th) period, Karnataka would have already received Rs 1,29,854 crore by March 2024," the clarification said.
The government has projected a further release of Rs 44,485 crore in the interim budget for FY25, taking the total to Rs 1,74,339 crore in five years. This is higher than the 14th FC period despite the precipitous drop in revenue during the Covid-19 period, the team said.
On the subject of cess and surcharges, the minister noted that a large part of the collection comprises GST compensation cess.
"...This cess does not belong to the centre and goes entirely for the benefit of the states. For instance, out of a total of Rs 4.81 lakh crore of cess and surcharge collections in FY22, an amount of Rs 1,04,769 crore was towards compensation cess, which was released exclusively for the states," the clarificatory note said.
Karnataka's Revenue Deficit Grant
On the subject of tax devolution, Karnataka is said to have received a revenue deficit grant of Rs 1,631 crore recommended by the 15th FC, as well as Kerala.
"The selective reference on devolution and ignoring grants is mischievous and unfair to the non-partisan expert constitutional body, that is, the finance commission," the minister's team said.
In assistance under the 50-year interest-free loan scheme and central funding towards disaster relief during the 15th FC period, Karnataka was provided an amount of Rs 6,280 crore and Rs 6,196 crore respectively, the government said.
Refuting the figures in media, Sitharaman's team noted that Karnataka has claimed compensation of Rs 21,075 crore from July 2022 and March 2023 and Rs 34,570 crore for FY24, which "are clearly outside the five year transition period provided under the Act and hence inadmissible."
