The Union Finance Ministry has firmly ruled out any alternative mechanism to compensate producing States such as Karnataka for revenue loss after the end of the GST compensation regime in June 2022. Minister of State for Finance Pankaj Chaudhary informed Parliament that no such proposal is under consideration and clarified that Karnataka has no pending special assistance grants, signalling that the State must rely on its own GST growth and existing fiscal transfers.
Backing its stand, the Centre pointed to Karnataka's strong GST performance over the past four years. The State's gross GST collections rose sharply from Rs 95,926 crore in 2021-22 to Rs 1,59,563 crore in 2024-25, reflecting robust economic activity led by services, IT, manufacturing and consumption.
During this period, CGST collections increased from Rs 22,697 crore to Rs 36,905 crore, SGST from Rs 28,660 crore to Rs 45,314 crore, and IGST from Rs 35,101 crore to Rs 59,550 crore. Compensation cess collections also nearly doubled, strengthening the Centre's argument that the State's tax base has expanded significantly.
Central fiscal transfers to Karnataka have also increased, though not evenly across all heads. The State's share in tax devolution rose from Rs 33,284 crore in 2021-22 to Rs 46,933 crore in 2024-25, totalling Rs 1.56 lakh crore over four years. Grants-in-aid fluctuated during this period but recovered to Rs 7,745 crore in 2024-25. In addition, Karnataka received Rs 13,026 crore under the Special Assistance Scheme for Capital Investment (SASCI), which the Centre says underscores adequate financial support.
However, concerns persist about the State's own revenue mobilisation beyond GST. The Registration and Stamps Department, Karnataka's third-largest revenue contributor, has fallen short of targets in successive years. Against a target of Rs 28,000 crore for 2025-26, collections stood at Rs 16,335 crore as of December 3, lagging behind last year's pace.
Officials attribute the shortfall to delays in issuing digital khatas, incomplete digitisation, software issues and the mandatory e-khata requirement introduced in October 2024, which has slowed registrations, particularly in Greater Bengaluru. With document registrations declining year-on-year, officers caution that meeting annual targets will remain difficult unless operational bottlenecks are resolved quickly.
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