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Karnataka is gearing up to host a national fiscal conclave in October, aiming to bring together chief ministers from across the country for a crucial discussion on the devolution of financial resources and the sharing of Goods and Services Tax (GST) revenue. The initiative, spearheaded by Karnataka Chief Minister Siddaramaiah, reflects the state's commitment to advocating for a fairer distribution of resources from the center to the states.
The conclave, envisioned as a platform for a national debate on devolution, will delve into the complexities of both horizontal and vertical devolution. Horizontal devolution refers to the distribution of resources among states based on their respective populations, economic indicators, and other factors. In this context, Karnataka, having seen its share in the divisible tax pool shrink from 4.71 percent under the 14th Finance Commission to 3.64 percent under the 15th, will seek to raise the issue of inadequate allocation and advocate for a higher share of 5 percent.
The conclave will also focus on vertical devolution, which pertains to the division of financial resources between the central and state governments. Karnataka is pressing for a larger share of the tax pie for states, proposing an increase in the vertical devolution ratio from the current 41 percent to 50 percent. This would signify a shift towards granting greater autonomy and financial independence to states.
Beyond devolution, the conclave will also tackle the critical issue of GST revenue sharing. Currently, states receive 50 percent of the Integrated Goods and Services Tax (IGST) collection, whereas they receive 41 percent of the Central Goods and Services Tax (CGST) collection. Karnataka is advocating for a revised sharing ratio of 40:60 in favor of states, arguing that the states bear the primary responsibility for tax collection and hence deserve a larger share.
The Karnataka government, under the leadership of Chief Minister Siddaramaiah, is actively engaging with other states to garner support for its proposals. The conclave, expected to draw participation from numerous states, is poised to serve as a significant forum for fostering a constructive dialogue on crucial financial issues facing the nation. The outcome of the conclave, including the consensus reached on key financial matters, could have far-reaching implications for the federal structure of India and the future of fiscal relations between the center and the states.
While the conclave presents an opportunity for states to collectively voice their concerns and advocate for a more equitable distribution of financial resources, it remains to be seen how effective it will be in influencing the central government's policies. The outcome of the conclave will depend on the level of commitment from the participating states, the strength of their arguments, and the willingness of the central government to engage in a constructive dialogue and consider their demands.