Siddaramaiah invites eight CMs including from NDA/BJP ruled Andhra, Maharashtra and Gujarat to discuss "unfair" devolution of taxes

It can be seen as a minor surprise.

Karnataka Chief Minister Siddaramaiah, a Congress leader, has written to the Chief Ministers of Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra, Gujarat, Haryana, and Punjab regarding the unfair devolution of taxes by the Union government. 

Importantly he has kept it apolitical and hence his list of invitees include three Chief Minister Devendra Fadnavis (Maharashtra), Bhupendrabhai Patel (Gujarat), Nayab Singh Saini (Haryana) and also N Chandrababu Naidu (Andhra Pradesh). 

“It is my pleasure to invite you to a conclave in Bengaluru to discuss these issues further. I will send a separate invitation indicating the dates once we firm up the schedule,” CM Siddaramaiah stated in his letter.

He said that the states with higher GSDP per capita, like Karnataka and others, are being penalised for their economic performance, receiving disproportionately lower tax allocations. This unjust approach undermines the spirit of cooperative federalism and threatens the financial autonomy of progressive states.

“I have invited them to a conclave in Bengaluru to collectively deliberate on the issues of fiscal federalism at a juncture when the Finance Commission needs to make a directional shift and create incentives for growth and better tax mobilisation,” the Chief Minister said.

“As you are aware the 16th Finance Commission has begun its deliberations. The previous Finance Commissions have laid excessive emphasis on equity at the cost of efficiency and performance. 

As a result, states with higher GSDP per capita and higher contribution to the gross tax revenues of the union are progressively receiving lower shares of the central fiscal transfers,” the letter reads.

“States with strong contributions to the country’s GDP and Gross tax Revenue, help build the nation in more than one. Therefore, there is an urgent need to balance equity with efficiency and performance for a stronger union, both politically and economically. It is therefore important that states which are receiving smaller shares in horizontal devolution, compared to articulate a coordinated set for proposals before the commission.  

Tax devolution is the distribution between the Union and states of the net proceeds of taxes. 

The releases of states' share (tax devolution) is as per the accepted recommendations of the Finance Commission for its award period.11 Jun 2024

The department of Economic Affairs in the finance ministry had in 2017 changed the date of devolution of states share in central taxes from the 1st of every month to 15th of every month initially and then quarterly devolution in subsequent period.  

If one looks at the devolution of central taxes to the five southern states – Andhra Pradesh, Telangana, Tamil Nadu, Karnataka and Kerala — their share did come down to 15.8 per cent during 2021-22-2024-25 each from around 18.62 per cent in 2014-15 which was the concluding year of the implementation of the 14th Finance Commission report and 18.04 per cent in 2015-16 which was the first year of the implementation of the 15th Finance Commission’s recommendations.

ends