"Taxes should be shared appropriately with states": Karnataka CM Siddaramaiah

Bengaluru (Karnataka) [India], July 1 : Karnataka Chief Minister Siddaramaiah on Monday emphasised on distribution of the net proceeds of taxes to be shared between the Centre and the States, and the allocation between the States of the respective shares of such proceeds.
The Karnataka CM also claimed that the states were not receiving their share of taxes properly from the Centre. Explaining that GST is an indirect tax, the CM said that before GST was introduced, the Government of Karnataka collected taxes through VAT.
"There has been an outcry that states are not getting their share of taxes properly from the Centre. Currently, the 16th Finance Commission is being constituted. We are advocating that taxes should be shared appropriately with the states that pay the highest taxes to the Centre," he said.
The Government of India, in adherence to Article 280(1) of the Constitution, has established the Sixteenth Finance Commission, appointing Dr Arvind Panagariya, former Vice-Chairman of NITI Aayog and Professor at Columbia University, as its Chairman.
Specific terms of reference have been outlined, including the distribution of tax proceeds between the Union and States, principles governing grants-in-aid to States, and measures to bolster State funds for local bodies like Panchayats and Municipalities.
Adding further, he said, "We have tried to bring this to the attention of the Central Government, Parliamentarians, and the Prime Minister. Under the 15th Finance Commission, the tax share for the state government has been reduced by 1.7 per cent. The development of the state is possible if more taxes are collected."
In February 2024, Chief Minister of Karnataka Siddaramaiah said that Karnataka has lost Rs 1,87,867 crore since 2017-18 due to the step-motherly treatment towards Karnataka and termed this as a missed opportunity for transformative development in the State.
He explained in detail how injustice is meted out to Karnataka in State's share in central taxes. Siddaramaiah said that despite Karnataka's substantial contribution of Rs 4,30,000 crore in tax revenue every year, we receive just about Rs 50,000 crore from the Union Government.
Meanwhile, the Karnataka CM also underscored the importance of taxation in running the state administration and said that the collection of taxes will result in more development.
"Taxation is necessary to run the state. Every government collects taxes and runs the country or state. The Constitution has empowered the central and state governments to levy taxes," said Siddaramaiah.
The Karnataka CM was speaking after inaugurating the GST Day programme organised by the Commercial Taxes Department at Vidhana Soudha's Banquet Hall.
He also presented the Chief Minister's Service Awards for the year 2024-25.
"We can see in many inscriptions that there was a tax system from the time of the kings, even before the people's government. Inscriptions state that the Kadambas introduced sales tax in Karnataka," said the Karnataka CM.
The CM said that 60,000 crore rupees are required for guarantee schemes.
"If the inequality of society is to be eliminated, everyone must be economically and socially empowered. Only then can equality be achieved. A special programme is being introduced to empower the economically weak. If the poor people of all religions and castes are to be empowered, there must be resources," he said.
Appreciating the way the Commercial Tax Department is functioning, the CM said that the department tries to prevent tax leakage. The department collected Rs 1,22,821 lakh crore in taxes in the years 2022-23 and Rs 1,45,266 crore in the years 2023-24.
The Chief Minister said that awards were distributed to 65 officers of the Commercial Tax Department and encouraged the remaining 6,000 officials to work towards earning awards. He expressed hope that this programme would inspire others.
Chief Minister's Political Secretaries Dr K Govindaraju and Nazir Ahmed, Finance Department and Chief Minister's Deputy Chief Secretary LK Ateeq, Commercial Taxes Department Commissioner C Shikha, Finance Department Secretary PC Zafar, and others were present.
GST is a consumption-based destination tax that is equally divided between the state and central governments.
As per the GST law, there will be an equal share of goods and services taxation between the central and state governments.
Whether there is an interstate transaction or an intrastate transaction, the GST share between the central and state governments will be the same.
There is a proper distribution of GST shares between the central and state governments under the Goods and Services Tax Act of 2017.
This distribution will be done by following the prescribed rules and regulations.