Karnataka CM Siddaramaiah Highlights Rs 12,000-15,000 Crore Annual Loss Due to GST Rationalisation
Karnataka Chief Minister Siddaramaiah has raised serious concerns about the financial impact of the Goods and Services Tax (GST) rationalisation implemented in the middle of the financial year. Speaking in the Legislative Assembly on Monday, the CM disclosed that this measure is projected to cost the state between Rs 12,000 crore and Rs 15,000 crore annually, significantly affecting budget estimates for the 2025-26 fiscal period.
Mid-Year GST Reforms Disrupt State Revenue Projections
The GST rationalisation, which was introduced in September last year, involved reducing the number of GST slabs from four to two. Siddaramaiah emphasised that this sudden change, implemented midway through the financial year, created unforeseen consequences for Karnataka's revenue collection plans. The state had already prepared its budget estimates based on the previous GST structure, and the reform caused substantial losses in anticipated GST revenue.
"This loss is a loss to the state, a loss to the people of the state," the Chief Minister stated while responding to the Motion of Thanks to the Governor's address. He questioned the timing of the rationalisation, suggesting it was announced with political considerations in mind, particularly referencing the Bihar elections.
Opposition Challenges CM's Assessment
The remarks sparked immediate reaction from the Opposition benches, with BJP MLA Araga Jnanendra arguing that the GST rationalisation actually benefits the public by simplifying the tax structure. Siddaramaiah countered this argument by asking whether the previous four-slab system was designed to harm citizens. He further challenged the Opposition by questioning how states are expected to manage their budgets when such significant tax reforms are introduced mid-year without adequate preparation time.
Constitutional Norms Violation Alleged Against Governor
In addition to the GST concerns, Siddaramaiah accused Governor Thawar Chand Gehlot of violating established Constitutional norms. The CM claimed that the Governor failed to read the speech prepared by the state government during the joint session, which included important aspects of the GST rationalisation impact and other critical issues. This omission, according to Siddaramaiah, represents a breach of constitutional protocol and undermines the government's ability to communicate its policy positions effectively.
16th Finance Commission Allocation Disappoints Karnataka
The Chief Minister also expressed disappointment with the 16th Finance Commission's allocation to Karnataka. He noted that the state could have received more equitable treatment if the allocation had exceeded the 4.7 per cent share granted under the 14th Finance Commission. However, the actual allocation under the 16th Finance Commission stands at only 4.131 per cent of the divisible pool of taxes, which Siddaramaiah described as failing to provide justice to Karnataka's legitimate aspirations and developmental needs.
The combination of reduced GST revenue and lower-than-expected Finance Commission allocations creates significant fiscal challenges for Karnataka, potentially affecting public services and development projects across the state.
