Karnataka CM urges PM Modi for GST compensation; state faces ₹9k cr shortfall plus ₹9.5k cr cess loss, national gap may hit ₹1.2 lakh cr
Karnataka Chief Minister Siddaramaiah has written to Prime Minister Narendra Modi urging compensation for losses incurred by the state following the recent Goods and Services Tax (GST) rationalisation. He has also raised objections to the Centre’s decision to impose a separate cess on pan masala, despite the product already falling under the GST framework where states are entitled to a share of revenue.
The Chief Minister noted that states had supported GST rate reductions in the interest of easing the burden on citizens and stimulating economic growth, but warned that the fiscal impact of these measures is now evident. Data shows that gross GST collections for November 2025‑26 declined by two per cent compared to a strong 9.3 per cent growth in November 2024. For the three months from September to November 2025‑26, year‑on‑year growth slowed to 3.3 per cent, down from nine per cent in the same period last year.
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Nationally, net domestic GST growth has dropped to 1.7 per cent during this period, compared to 8.9 per cent previously. If the trend continues, collections for the current financial year could fall to ₹14.6 lakh crore against the estimated ₹15.5 lakh crore, resulting in a shortfall of ₹85,000 crore. The overall loss for the year could reach ₹1.2 lakh crore, with states further impacted by reduced devolution shares.
Karnataka’s own figures mirror this slowdown. The state recorded just 3.1 per cent growth in net GST collections between September and November 2025‑26, projecting a revenue shortfall of ₹5,000 crore this year and ₹9,000 crore for the full financial year. This is in addition to an estimated ₹9,500 crore loss due to the non‑merger of the compensation cess.
Siddaramaiah has suggested fixing the base year for revenue collections at 2024‑25, adjusted for cess collections, to better reflect the fiscal potential of states.
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