Karnataka losing over ₹20,000 crore annually after migration to GST regime

Karnataka has been losing ₹20,000 crore to ₹25,000 crore annually owing to migration to the Goods and Services Tax (GST) regime in 2017, while the State’s contribution to the GST pool has been increasing.

“This has affected the State’s finances. Economy is not weak but compared to the national collection, what we are getting is not enough,” Revenue Minister Krishna Byre Gowda told the Legislative Council on Monday.

Speaking during a discussion on Karnataka GST (Amendment) Bill 2025, which was passed by the House later, he said that Karnataka was contributing ₹8.2 per every ₹100 collected as GST in the country.

“This contribution has now increased to ₹9.2. If we have to improve our GST collections, loopholes have to be plugged,” he said.

Preventing misuse

The amendment that was passed not only seeks to prevent misuse of input tax credit but also exempts GST on goods moved from one SEZ to another.

Mr. Gowda said that the State has made a strong appeal before the 16th Finance Commission for increasing Karnataka’s share. “We have asked the commission not to kill the goose that lays the golden egg. Karnataka is the highest per capita taxpayer in the country.”

Tax evasion

Acknowledging that there is a huge tax suppression and evasion in arecanut trading, pan masala, and gutka, along with tobacco and allied products, the Minister said that through the amendment Karnataka intends to bring in the track and trace method based on system intelligence to prevent input tax credit-related frauds.

“The highest tax evasion now is in pan masala and gutka with 60% to 70%, while it is about 30% to 40% in tobacco products.”

The track and trace method is to map the entire value-added chain from raw materials to finished product involving both buyers and sellers.