Karnataka seeks 50% share in duty on tobacco, pan masala

'Karnataka is a major contributor to national growth, but is facing shrinking fiscal space amid GST changes, rising social commitments, climate shocks, and rapid urbanisation,' Byre Gowda said.

New Delhi: Karnataka on Saturday urged the Centre to share 50 per cent excise duty on tobacco and cess on pan masala with states to restore fiscal equity and cooperative federalism.

Revenue Minister Krishna Byre Gowda, who attended a pre-budget meeting convened by Union Finance Minister Nirmala Sitharaman here, told reporters that states bear the public health, enforcement, and regulatory costs, but cess proceeds remain outside the divisible pool.

So the Centre must 50:50 share of excise duty on tobacco and cess on pan masala to restore fiscal equity and cooperative federalism, he said.

Byre Gowda, who attended the meeting on behalf of Chief Minister Siddaramaiah, said "Karnataka is a major contributor to national growth, but is facing shrinking fiscal space amid GST changes, rising social commitments, climate shocks, and rapid urbanisation."

He pointed out that post-GST rate rationalisation, Karnataka’s GST growth has fallen from 12 per cent to 5 per cent, resulting in a ₹5,000 crore shortfall this year and ₹9,000 crore annually.

"While the Centre has offset its loss through cess on pan masala and excise on tobacco, States lack similar flexibility. I request a robust revenue protection mechanism for States and to ensure full compensation for revenue loss, similar to GST Compensation cess, he said in his memorandum.

He also requested the Union Minister to release pending Central share of Rs 11,786 crore under Jal Jeevn Mission for speedy execution of the scheme.

While urging the Centre to reconsider G-RAM-G replacing MGNREGA he said shift from demand-driven MGNREGA to allocation-based G-RAM-G has reduced effective employment days.

In order to continue to provide livelihood security to the tune of 13 crore person-days, Karnataka would require approximately Rs. 2,000 crore that is fiscally unsustainable. New cost-sharing has increased State burden.

Demanding to declare Upper Bhadra as a national project, he sought the release of ₹5,300 crore Central assistance as announced 2023-24 Union Budget.

Highlighting that the central contribution to salaries of anganwadi, Asha, cooks/helpers has remained stagnant for years, the Karnataka government requested the Union Finance Minister to revise the central share in salaries of anganwadi and Asha workers to Rs 8000 per month and that of cooks and helpers to Rs 5,000 a month.

He also requested for the speedy release of Rs 5,495 crore of special grants, Rs 6,000 crore of state-specific grants as recommended by the 15th Finance Commission. He also demanded Rs 5,000 crore additional central support beyond the state's annual allocation for the development of the Kalyana Karnataka region.