The finance minister was replying to a question by Congress leader Adhir Ranjan Chowdhury in the Lok Sabha on the Karnataka government’s claim that the Centre is not releasing funds due to it.
“This apprehension that some states are being discriminated against is a politically-vitiated narrative which, I am sorry to say, vested interests are happy to go about saying,” Sitharaman said.
She added that such a situation cannot happen since the “system is well placed” and the central government works according to recommendations of the Finance Commission
Chowdhury was referring to a proposal backed by the Congress government in Karnataka to form a forum of southern states to ensure equitable distribution of resources from the Centre, including individual tax share from the divisible pool. The BJP is not part of the government in any of the five southern states: Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu.
Karnataka deputy chief minister DK Shivakumar said the Congress’ state unit — including all MLAs, MLCs and MPs — will protest against the Union government on February 7 in New Delhi for not allocating proper funds to the state in the interim Budget.
‘Can’t play with Finance Commission’s recommendations’
Sitharaman said that no Union finance minister can play with the Finance Commission’s recommendations.
“This is just not a possibility that any finance minister can intervene to say that ‘I don’t like this state, stop payment’ … It can’t happen that way. The system is well placed,” she said.
The 15th Finance Commission, in its final report, had recommended the transfer of 41 per cent of taxes to the states after Jammu and Kashmir was carved out into two union territories. Furthermore, it said that factors like income distance, population, forest cover and demographic performance would determine the share of states.
Citing the report, Sitharaman said she “does not have any right” to change the rules.
“I have no right to change the rules as per my whims and fancies … I have no role to play. In fact, I have to follow 100 per cent,” she said.
“That is what I have done in my term. All finance ministers do that. Implement the recommendations of the Finance Commission. It is done without fear or favour,” she added.
Sitharaman added Chowdhary claimed that she was working “politically” and said everything was hunky dory till six months ago.
“I want to say, till six months ago, all was hunky dory. What is going wrong now? Have you spent on items which you were not supposed to? I am not even questioning. Do spend it but don’t put the blame on me. Don’t put blame on the Centre as it goes by the book,” she said.
“If the expenditure is going in areas which it cannot sustain by your Budget, I am not answerable. Which government was there till six months ago is not my role to talk about. If it was hunky dory then and now it is not, introspect, please,” she added.
‘Spoke to Shivakumar, heard his concerns’
The finance minister further said that if there was an insinuation that she was withholding the money, everyone concerned should talk to the Finance Commission and state their needs, requirements and status and let the commission take a call as it is a constitutional body.
Sitharaman added that Karnataka deputy chief minister Shivakumar had met her, conveyed to her the state’s issues and she heard him.
“I told him matter of fact. I can’t do anything which the Finance Commission tells me not to do. Unless the Finance Commission asks me to do (something), I can’t do anything. I don’t have the discretion. Please don’t imagine that I have the discretion to play around with the Finance Commission’s recommendations. Please talk to the Finance Commission,” she said.
Sitharaman also said she was talking about the Finance Commission’s recommendations that she follows to the last word.
“I am not talking about anybody’s generosity. The Finance Commission gives recommendations, I follow it. Now you suddenly say meet the state, I met the state. Then you said you are not doing anything, which I can’t,” she said.
Sitharaman said devolution of tax on direct tax matters happens according to the Finance Commission’s recommendations.
She said GST — particularly SGST (State GST) — is fully with the state as 100 per cent of it is collected by the state. The IGST is collected by the Centre as it involves a lot of inter-state payment.
Sitharaman added that it is also periodically reviewed by the GST Council because the states should get money in their hands — roughly, grossly, 50 per cent is divided and then periodically readjusted to actual.
“So if a state were to get 41 (per cent) and not 50 (per cent), adjustment happens. If a state were to get 52 (per cent), adjustment happens. Often, now and then, when the money is accumulated under the IGST, it is divided grossly at 50-50 to all states and gets reconciled over time when the data comes up,” she said.
She said that Finance Comission determines the proportion of CGST and all suggestions are accepted and implemented by the Centre.
“This rate fixation has nothing to do with the Union government as how much should go to a state is determined by the Finance Commission.
“Does the Finance Commission sit in one place and take a call on it? No. It goes all over, meets with every state government, talks to them and only then (do) they submit the report,” she said.
(With inputs from PTI)