New Delhi, 13 June

Chief Minister Siddaramaiah met with 16th Finance Commission Chairman Arvind Panagariya on Friday, demanding a larger allocation for the State from the central tax pool for the five-year period beginning 1 April, 2026.

In the main memorandum submitted, Siddaramaiah proposed that the share of taxes devolved to states (vertical devolution) be increased to at least 50 per cent, and that cesses and surcharges be capped at 5 per cent. The State also recommended including Union non-tax revenues in the divisible pool.

For sharing funds among states (horizontal devolution), the memorandum suggested that each state retain about 60 per cent of what it contributes, with 40 per cent going to less-developed states — ensuring both growth and equity.

"The meeting was very cordial and the Chairman was very receptive to our demands. I have submitted an additional memorandum seeking higher allocation to the State from the central tax pool," Siddaramaiah told reporters after the meeting.

"The Centre collects cess and surcharge on various commodities. We don't have a share in it. It is kept by the Government of India. If they collect more than 5 per cent (of cess) it should come under the divisible pool," he said.

Siddaramaiah noted the State’s share of central tax revenues dropped significantly under the 15th Finance Commission (2021-26) to 3.64 per cent, down from 4.71 per cent during the 14th Finance Commission period (2015-20).

The overall share allocated to all states from central taxes was reduced to 41 per cent for 2021-26, as against 42 per cent in the previous cycle, primarily due to the creation of Union Territories of Jammu and Kashmir and Ladakh. This resulted in both a percentage and absolute decline in the State’s tax allocation.

Siddaramaiah was accompanied by Chief Secretary Shalini Rajneesh, Principal Secretary of Finance Ritesh Singh, and other State officials.

The 16th Finance Commission, established in December 2023, is tasked with recommending tax revenue distribution between the central government and states for 2026-31. The commission is currently conducting consultations and must submit its recommendations by 31 October, 2025. -PTI 

Small graphics: 

The memorandum proposed that: 

50% share of taxes devolved to states (vertical devolution). 

5% cap on cess and surcharges.

60% Each state should retain of what it contributes (horizontal devolution)