Union Finance Minister Nirmala Sitharaman on Monday came down heavily on allegations that the Centre is withholding funds meant for non-BJP governed states, saying it is a "politically-vitiated narrative" that "vested interests" are happy to go about saying.

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, Sitharaman said such a situation cannot happen as the "system is well placed" and the central government works according to recommendations of the Finance Commission.

"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," she said during Question Hour.

Sitharaman added 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.

There have been reports that 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.

"Karnataka is the state that generates the second-highest tax in the country and it is sad that our state gets a setback every time. For the last five years, the BJP government has been ignoring Karnataka. This is unfair," he had said.

The Union finance minister 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 further said.

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.

The finance minister said if there was an insinuation that she was withholding the money, everyone concerned should talk to the Finance Commission and tell their needs, requirements and status and let the commission take a call as it is a constitutional body.

Sitharaman said the Karnataka deputy chief minister 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.

Referring to the CGST (Central GST), the finance minister said it is divided on the advice of the Finance Commission, which determines the proportion, 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.

Replying to another question, Sitharaman said cess compensation is done on the basis of certificates provided by the accountant general of the state concerned.

"The moment they come with the accountant general's certification, we pay them. In the case of Kerala, the accountant general's certificate has been received for four years except the first quarter of 2022-23. Any payment that is made is done on the basis of the accountant general's certificate. That is the principle on which the compensation cess is given," she said.

The finance minister said Nagaland has not given the accountant general's certificate for any year since 2017, Sikkim for three years, West Bengal for four years -- it varies from state to state.

"The moment the claims along with the accountant general's certificate comes, we release the compensation amount. We are not withholding any amount for any reason except this, ie the accountant general's certificate," she said.

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