Karnataka CM Demands GST Compensation Amid Revenue Decline

Karnataka Chief Minister Siddaramaiah urges the Indian government to compensate states for revenue losses due to GST rate changes. He warns of financial strain on states and advocates for a better share of revenue from the pan masala cess to maintain fiscal autonomy and support state finances.

Karnataka's Chief Minister Siddaramaiah has renewed his call for central compensation for states' revenue losses stemming from the rationalization of GST rates. In a communication to Prime Minister Narendra Modi, he signaled that the ongoing trend jeopardizes state finances and called for the base year of revenue collections to be updated to 2024-25.

Siddaramaiah highlighted the Union government's advantageous position in revenue collection, particularly through its exclusive fiscal measures such as excise duties on tobacco and additional cesses. He argued for a 50/50 revenue sharing model on the pan masala cess proceeds to realign fiscal autonomy with state needs.

Data from the recent quarters suggest a steep decline in GST revenue growth, alarming regional governments about further financial strains. In Karnataka alone, the state predicts a sizeable revenue shortfall due to non-merger of compensatory mechanisms within the GST system, prompting Siddaramaiah to call for urgent fiscal adjustments.

(With inputs from agencies.)