The Hindu Business Line : No new taxes in Karnataka Budget

Bouquet of schemes
Gross revenues estimated at Rs 35,875 crore.
Agriculture income tax waivers/ tax reductions for small, firms and companies
Farm loans from cooperatives at 4 per cent.
Power subsidies hiked.
Stamp duty reduced by another 0.5 per cent from current 8 per cent.

Bangalore , March 20

The Karnataka Development Front Government presented its maiden budget targeting the rural and the farm sector.

Presenting the Budget for 2006-07, the Deputy Chief Minister and Finance Minister, Mr B.S. Yediyurappa, said the revenue surplus would be Rs 1,534.54 crore. This is despite the slew of subsidies and government spending for the rural and the farm sector.

Proposed subsidies

The proposed subsidies for the farm sector include bringing down the interest for loans drawn through cooperative societies to four per cent. Currently, the Central scheme for farm loans has an interest rate of seven per cent.

For below poverty line families, Mr Yediyurappa has earmarked Rs 720 crore as food subsidies. For the plantation sector, he has waived agricultural income tax on small growers. For companies and firms, the rates have been brought down to 35 per from 50 per cent and to 30 per cent, respectively.

Subsidies to the power sector have beenhiked to Rs 2,373 crore. This includes direct subsidies by way of Rs 1,800 crore, an increase of Rs 50 crore. In addition, the State Government has offered incentives for regularising unauthorised pump sets in the State.

Currently, there are about 70,000 pump sets. Irrigation pump set owners would be asked to bear a cost of only Rs 10,000. The remaining cost of regularising of Rs 16,450 per pump set would be borne by the Government.

Capital expenditure

Capital expenditure of the Government includes earmarking funds for airport infrastructure in the State. This amounts to Rs 152.28 crore. In addition, the State Government has announced schemes for upgradation of water supply schemes and creation of ring roads in tertiary cities of the State.

As a result of all these schemes, the gross expenditure of the State is Rs 41,850.66 crore. Revenue expenditure for the current year is Rs 34,340.54 crore and capital expenditure is Rs 7,510.12 crore. The Plan outlay for meeting the expenditure would be Rs 16,166 crore for the next financial year. The rest would be from non-Plan expenditure.

No new taxes

On the revenue side, there are no new taxes in the Budget. Additional revenue mobilisation is entirely expected from greater compliance.

However, the State excise duties have been hiked on liquor and beer.

The incremental revenue is estimated at Rs 300 crore. Gross revenue receipts estimated for the next fiscal is Rs 35,875.08 crore up from the revised estimate for the current year's receipts of Rs 29,684.83 crore. Karnataka's own tax receipts are estimated at Rs 22,533.79 crore in 2006-07 up from Rs 19,504.80 crore in the revised estimates of the current year.

The only revenue containment that the State Government is taking for the next financial is through a shift in pension liability from defined benefit to a defined contribution scheme. But the State hopes to reduce non-Plan expenditure by 5 per cent, Mr Yediyurappa said. As a result, the fiscal deficit for 2006-07 is estimated at Rs 5,210 crore or about 2.82 per cent of the Gross State Domestic Product.

For the current financial year, the State Government's estimated revenue surplus is Rs 1,186.79 crore. This is despite the Rs 1,041 crore loss suffered by the State after migration to the VAT regime. The VAT losses have been partly offset by Central receipts and increased realisation of excise duties. As a result, the fiscal deficit for the current year is estimated at Rs 4,764 crore or 2.85 per cent of the GSDP.