BENGALURU: The state cabinet on Friday decided to set up a three-member technical advisory cell to effectively argue the state’s case before the 16th Finance Commission and the Centre, as the state has been losing its share of taxes of over Rs 45,000 crore annually. The cell will be constituted at the Fiscal Policy Institute with former members of the finance commission Govinda Rao, experts M Srinivas Murthy MR and Narendrapani as its members. The Centre has converted the tax component on petrol and diesel as cess and surcharge, causing a loss of about Rs 8,200 crore.
Another Rs 25,000-30,000 crore is lost because of the implementation of GST. The Centre has also not released Rs 11,495 crore as a one-time relief though recommended by the 15th Finance Commission. “It has affected the state’s financial health and we will argue our case to establish our right to get the share due to the state,” Revenue Minister Krishna Byre Gowda told the media.
The state is the second-biggest taxpayer and is estimated to contribute Rs 4 lakh crore through various taxes, but gets Rs 65,000-70,000 crore as grants from the Centre, he added. The IT-BT sector contributes Rs 3.5 lakh crore annually to foreign exchange.
“Though IT/BT exports have not been earning revenues for the state, their contribution to per capita income growth has not been taken into account by the Centre,” he said. During the 14th Finance Commission, the state got 4.71 per cent of its share, but it has reduced to 3.64 per cent, causing a loss of Rs 14,000 crore, he elaborated.
The 15 Finance Commission had recommended 41 per cent of returns to the state through devolution, but in reality 30 per cent was given, he said. “The Centre has continued consumer taxes on petrol and diesel, but converted them into cess and surcharge to keep 95 per cent to itself by not showing it in the tax divisible pool,” he alleged.
“Before GST was implemented, the growth rate was between 13 and 16 per cent and GST loss compensation to states ended in June 2022. The states like us with 14 per cent growth losing out Rs 25,000-30,000 crore,” he remarked. He criticised the Centre for taking the 1971 population into account to consider the quantum of grants. The states that have not implemented family planning gained, while states like Karnataka lost out, he added.