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Commercial taxes collections during the first two months alone were Rs 1,063 crore for the current fiscal. This is about 15 per cent of the target of the entire fiscal year.

BANGALORE, June 27

TAX collections in Karnataka have been encouraging during the first two months of the current fiscal year.

The collections have triggered hopes that this year the Government would be in a position to meet its internal revenue targets. Cumulative collections for the first two months of the current financial year are about Rs 1,600 crore. This is about 14 per cent of the full year's target of Rs 11,747.05 crore. For the month of May alone, this figure was Rs 779.30 crore.

Sources said that tightening of the tax administration mechanism buoyed the collections. This resulted in recovery of arrears.

The bulk of the arrears recovery has come from commercial taxes. Commercial taxes collections during the first two months alone were Rs 1,063 crore for the current fiscal. This is about 15 per cent of the target of the entire fiscal year. Excise collections for the first two months amounted to Rs 218 crore or about 9.5 per cent of this year's target.

Motor vehicle tax collections had, however, been disappointing , sources said. Motor vehicle collections were only about Rs 105 crore against the target of Rs 820 crore. Normally, this was one component that remained high, especially during the last five years.

Sources said that one of the major reasons for this slowdown in collection was the reduced sales of automobiles in the State, particularly personal transportation vehicles where the taxation is one-time. The high collections earlier also coincided with the software boom in the country, the major beneficiary of which was Karnataka.

Besides, commercial vehicles have preferred cross-border registration. Consequently, any tax payments by commercial vehicles is reflected in the commercial taxes. But sources said that tax collections would help in mitigating the pressure on the fiscal correction measures put in place by the State Government. The State fiscal deficit is already running close to 6 per cent of the State Domestic Product, at least three per cent above the target prescribed by the World Bank in the medium-term fiscal adjustment programme.

What is expected is that in the event of good inflows into the reservoirs, power availability will be expected to be good. This is expected to augur well for revenue collections and fiscal correction.

However, on this front, inflows in the first month into the Sharavathy Valley, the mainstay of the State's power supply, has not been very encouraging. Inflows are way below last year, though drawdowns have already begun.

But the State Government is pinning its hopes on better inflows during the next month, when the monsoons are expected to peak.

It is expecting the better inflows to translate into higher agricultural and industrial outputs, leading to higher consumption of goods.

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