The Karnataka Budget for 2011-12 projects a fiscal deficit of 2.87 per cent of gross state domestic product (GSDP), assuming a growth rate of 8.5 per cent in real terms this fiscal and an inflation rate of 6 per cent. This fiscal deficit for 2010-11 is pegged at 3.44 per cent.

Briefing newspersons here on growth and inflation prospects, State Department officials also said that these assumptions were “in line with that of the Centre”.

By pointing out that the GSDP grew by 8.2 per cent in real terms in 2010-11 and 16 per cent in nominal prices, the Budget acknowledges an inflation rate in Karnataka of 7.8 per cent in the last fiscal.

VAT raised

Presenting his Budget proposals in the Assembly here on Thursday, the Chief Minister, Mr B.S. Yeddyurappa, said that goods that attract a value added tax (VAT) of 13.5 per cent would now be taxed at 14 per cent.

These include a range of consumer durables such as vehicles, washing machines and television sets.

Additional excise duty has been raised from 10 per cent to 20 per cent across all the 17 slabs. “I also propose to increase the Declare Price slabs by Rs 25 across all the 17 slabs,” the Chief Minister said.

Motor vehicle tax

The State Government collected Rs 2,400 crore through motor vehicles tax in 2010-11, and expects to mop up Rs 2,800 crore in 2011-12. “It is proposed to allocate a sum of Rs 20 crore every year for Urban Transport Fund announced earlier, to be collected by raising the cess from 10 per cent to 11 per cent,” the Chief Minister said.

Mr L. V. Nagarajan, Principal Secretary, Finance Department, told Business Line on the sidelines of the press briefing that States have sought a band of GST rates, rather than a single rate, to provide more flexibility in raising money in the event of contingencies, as well as a compensation period of 10 years.

On the expenditure side, roads and urban infrastructure in Bangalore in particular has been accorded special emphasis.

The State will set aside Rs 487 crore as its share in 16 rail projects, which involve laying new lines and gauge conversion.

An amount of Rs 4,770 crore has been accorded for overall infrastructure development of Bangalore.

A grant of Rs 683 crore has been given for the first phase of Bangalore Metro.

A sum of Rs 1150 crore has been set aside for Cauvery Water Supply Scheme Stage IV Phase II.

Revenue projection

The State Government has projected a revenue increase of over Rs 5,000 crore this fiscal, from Rs 38,049 crore to Rs 43,817 crore.

The share of Central taxes is expected to increase by about Rs 700 crore this fiscal, and is pegged at Rs 10,419 crore. Grants from the Central Government are expected to increase by about Rs 1,500 crore at Rs 8,402 crore.

The non-tax revenue is flat at Rs 3675 crore, against Rs 3519 crore in 2010-11.

Total revenue is, therefore, budgeted at Rs 66,213 crore, Rs 1,279 crore more than the projected expenditure for 2011-12, or a revenue surplus of 0.29 per cent of GSDP.

Officials said that the record kharif production in 2010-11 and a good year for oilseeds had reduced inflationary pressure.

However, in his Budget speech, Mr Yeddyurappa said, “it should also be ensured that monetary policy measures do not adversely affect prices and flow of credit to farmers and weaker sections of society”.

PTI adds: Mr Yeddyurappa announced exemption from VAT of coconut and de-oiled rice bran, as also on leasing of feature films and sale of copyrights relating to feature films.

He proposed to exempt distributors of feature films from registration and to provide for payment of composition amounts in lieu to regular tax by home—stay units.

The composition amount payable in respect of “totalisator tax” by Bangalore Turf Club is proposed to be increased from four per cent to eight per cent.

A pay committee would be constituted for considering the government servants' request vis-a-vis pay revision.

Besides, a sum of Rs 62 crore would be provided for establishment of new industrial clusters.

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