GST reform: Karnataka CM Siddaramaiah urges Centre to safeguard states' fiscal autonomy

New Delhi: Karnataka Chief Minister Siddaramaiah on Friday urged the Centre to protect states fiscal interest before going ahead with rationalisation of GST rates.

"We are for rationalisation of GST rates, ease compliance and reducing the burden on the people. But such reforms must be accompanied by a robust framework that protects the fiscal interests of the states. Without this, states will find it difficult to sustain welfare and development programmes, and a serious weakening of their financial autonomy," the CM said in a statement.

Opposition leaders had consistently objected to the faulty implementation of GST in 2017 and have always demanded rationalisation of rates. Even within the GST Council, states have repeatedly pressed for rationalisation, always with the caveat that the revenue interests of states must be safeguarded. Karnataka too has raised this issue in multiple Council meetings, he said.

"For the sake of endurance and stability of GST, Centre and states must work together. This requires states to be taken into confidence and their concerns addressed adequately. We expect the central government to respond constructively and positively, and engage with states in good faith in the true spirit of cooperative federalism, " he said in a statement.

Siddaramaiah also pointed out that Karnataka has already been subjected to discrimination in the devolution of funds from the Union Government, suffering an annual shortfall of nearly ₹25,000 crore. Any further erosion of GST revenues will only compound this injustice and directly affect our capacity to deliver on the promises of development and welfare, he said.

He urged that the rationalisation of GST rates must be supported by robust revenue protection framework for states, supplementary levy on sin and luxury goods, and guaranteed compensation mechanism for at least five years.