A massive political storm has erupted over the NDA government’s alleged attempt to cut the states’ share of tax revenue from 41 per cent to 40 per cent. Karnataka Chief Minister Siddaramaiah, who is getting ready to present his 16th budget next week, lashed out at the Centre, calling it an “unfair anti-federal” move that could cripple state finances and hinder governance.
“This is nothing but an outright assault on states’ rights. The Central government is treating Karnataka and other states like its subordinates, pushing them into economic desperation and dependence,” Siddaramaiah thundered. “If our appeals fall on deaf ears, we are prepared to fight democratically, and even take to the streets…”
According to reports, the Centre is pressuring the Finance Commission to reduce tax devolution, a move that could severely impact Karnataka’s economy. Siddaramaiah has accused the Modi government of deliberately targeting Karnataka to undermine the Congress government, which has gained massive public support through its guarantee schemes.
He questioned, “Karnataka contributes nearly Rs4 lakh crore to the Central government every year, yet we receive a mere 15 paise per rupee in return. Over the past five years, we have already lost Rs 68,775 crore due to reduced tax devolution. Now they want to cut even more?”
The Karnataka government has claimed that the state has been repeatedly shortchanged by the Centre, with major cuts in crucial grants: Rs 1,311 crore slashed from urban local body grants, Rs 775 crore cut from Panchayat Raj institutions, Rs 826 crore reduced from health sector funds, and Rs 340 crore withheld from disaster relief fund. Additionally, Rs 3,300 crore in pending funds and special grants recommended for 2024-25 and 2025-26 remain unpaid.
Siddaramaiah pointed out that Karnataka has lost Rs 53,359 crore between 2017 and 2025 due to cess and surcharges being kept outside the divisible tax pool. While these levies accounted for 8.1 per cent of total taxes in 2010-11, they now make up 14 per cent, further reducing Karnataka’s share of tax revenue.
“This is financial strangulation. If cess and surcharges are not shared, why should Karnataka continue paying them?” Siddaramaiah questioned, demanding either their abolition or inclusion in the divisible tax pool.
With special grants unpaid, GST compensation withdrawn and Karnataka’s rightful tax share dwindling, the CM issued a warning to the Centre: “If our rightful funds are not released immediately, the Congress government in Karnataka will not sit quietly. We will take our fight to the streets and rally the people against this injustice.”
