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Karnataka Seeks 50% Share of Central Taxes and Cess Cap From Finance Commission

Siddaramaiah argued that a formula reweighting toward economic performance will ensure high-growth states are rewarded.

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Karnataka Chief Minister Siddaramaiah.
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Overview

  • Chief Minister Siddaramaiah met Finance Commission chair Arvind Panagariya on June 13 to press Karnataka’s case for higher tax shares.
  • He highlighted that Karnataka recovers just 15 paise per rupee contributed to Union taxes and lost over ₹80,000 crore after its FC share fell from 4.713% to 3.647%.
  • Karnataka demanded at least 50% vertical devolution of central taxes, a 5% cap on cesses and surcharges, and inclusion of non-tax revenues in the divisible pool.
  • The state proposed reducing the weight of the income-distance criterion by 20% and reallocating it to economic contribution while recommending a 60:40 retention ratio for high- and low-performing states.
  • It sought ₹1.15 lakh crore for Bengaluru infrastructure and urged replacing discretionary special grants with formula-based allocations of 0.3% of gross Union receipts.