"States have cooperated in good faith with the reform process. It is now imperative that their fiscal stability is safeguarded through appropriate support from the Union," he added.
Published Dec 06, 2025 | 11:57 AM ⚊ Updated Dec 06, 2025 | 11:57 AM
Karnataka CM Siddaramaiah. (X)
Synopsis: He further noted that he has written to the Modi requesting that the Union compensate States for this loss and also consider sharing the pan masala cess revenue on a 50:50 basis, as it is a GST-liable item and forms part of the rightful tax share of States.
After the Lok Sabha passed a Bill to levy a special cess on pan masala, on Friday, 5 December, Karnataka Chief Minister Siddaramaiah wrote to Prime Minister Modi to, “consider sharing the pan masala cess revenue on a 50:50 basis, as it is a GST-liable item and forms part of the rightful tax share of States.”
Sharing the letter, Siddaramaiah wrote on X: “We supported the GST rate rationalisation in the larger public interest, despite expressing serious concerns about the potential fiscal impact on States. Unfortunately, the subsequent trends have confirmed these apprehensions. Karnataka has recorded a sharp decline in Net GST growth in the months following rationalisation, resulting in a projected shortfall of nearly ₹14,600 crore this year.”
He further noted that he has written to the Modi requesting that the Union compensate States for this loss and also consider sharing the pan masala cess revenue on a 50:50 basis, as it is a GST-liable item and forms part of the rightful tax share of States.
“States have cooperated in good faith with the reform process. It is now imperative that their fiscal stability is safeguarded through appropriate support from the Union,” he added.
The letter read: “In this context, it has been reported in the media that the Union Government proposes to share part of the pan masala cess proceeds with States through a centrally sponsored health scheme focusing on awareness-building and related programmes. Such an arrangement would limit States’ autonomy, as these funds would not carry the flexibility associated with untied tax revenues.”
“Given that pan masala squarely falls within the GST base, the associated revenues should flow to States as part of the GST framework, rather than being channelled through a centrally sponsored scheme. While we fully endorse that tax incidence on pan masala should not come down, the imposition of a cess deprives States of their rightful share of revenue. I would urge that the Government of India consider a mechanism of sharing this revenue 50:50 with States.”
We supported the GST rate rationalisation in the larger public interest, despite expressing serious concerns about the potential fiscal impact on States. Unfortunately, the subsequent trends have confirmed these apprehensions.
Karnataka has recorded a sharp decline in Net GST… pic.twitter.com/jvS4tAC0Cv
— Siddaramaiah (@siddaramaiah) December 5, 2025
