Karnataka Chief Minister BS Yediyurappa painted a grim picture of the State’s economy while presenting the Budget for 2020-21 as he announced increases in tax on petrol, diesel and excise duty on liquor to mop up additional resources.
Yediyurappa said he had to resort to these hikes as the State’s share in central taxes has come down in 2019-20 as per the Centre’s revised budget estimates. Hence, there is a reduction of ₹8,887 crore in the State’s income. In addition, ₹3,000 crore GST compensation will also be reduced as collections from the GST compensation cess has also fallen short. He also pointed out that there will be a reduction of ₹11,215 crore in State’s share of central taxes in 2020-21 Budget as the 15th Finance Commission has reduced its share to 3.64 per cent of central taxes in its report.
Yediyurappa said there has been an increase of ₹10,000 crore in outgo for 2020-21 with regard to government employees’ salaries, pension and interest on government loans while there has been no proportionate increase in the resources. “The magnitude of economic difficulties was never faced in the previous years by our State,” he said. The only silver lining was that the State’s own tax revenue collection has seen a 14 per cent growth in the State GST collection
He also said to contain the situation within the bounds of the Karnataka Fiscal Responsibility Act, the State plans to cut down the expenditure of many departments.
Liquor/Petrol/Diesel prices to go up
Additional Excise Duty (AED) on Indian Made Liquor (IML) will go up by 6 per cent across all 18 slabs. The proposed increase ranges from ₹153 per bulk litre (BL) to ₹3,572. Through this, the State is expected mop-up ₹1,200 crore.
The budget also proposes to increase rate of tax on petrol from to 35 per cent from 32 per cent and diesel to 24 per cent from 21 per cent. The increase in price of petrol is by ₹1.60 per litre and that of diesel by ₹1.59 per litre. The State is expected to raise ₹1,500 crore. “Even after this increase, the price in Karnataka will be comparable to other neighbouring States,” said Yediyurappa.
The budget also proposes to reduce the stamp duty on first time registration of new apartments/ flats costing less than ₹20 lakh from existing 5 per cent to 2 per cent.” He has also proposed to levy Motor Vehicles tax on contract carriages having seating capacity of more than 12 passengers but not more than 20 passengers at the rate of ₹900 per seat per quarter. It is also proposed to levy Motor Vehicles tax on New Model sleeper coaches which are granted permits under section 88 (9) of M V Act 1988 at the rate of ₹4,000 per sleeper per quarter.”
State’s fiscal position
The total receipts are estimated to be ₹2,33,134 crore during 2020-21. The Budget Estimates (BE) envisage Revenue Receipts (RE) of ₹1,79,920 crore and Capital Receipts (CP) of ₹53,214 crore including borrowings of ₹52,918 crore. The total expenditure is estimated to be ₹2,37,893 crore consisting of RE of ₹1,79,776 crore, Capital Expenditure of ₹46,512 crore and debt repayment of ₹11,605 crore.
Yediyurappa said revenue surplus is estimated to be ₹143 crore while the fiscal deficit is expected to be ₹46,072 crore, which is 2.55 per cent of GSDP. Total liabilities at ₹3,68,692 crore at the end of 2020-21 are estimated to be 20.42 per cent of GSDP. This is within the limit of 25 per cent for 2020-21 mandated in Karnataka Fiscal Responsibility Act.
“Therefore, all these three fiscal parameters are within the mandate of the Karnataka Fiscal Responsibility Act and this reflects fiscal prudence of the State,” he said.
The States Own Tax Revenue (SOTR) for 2020-21 including GST compensation is estimated to be ₹1,28,107 crore which is an increase of 7.66 per cent over the Revised Estimate of 2019-20.
A total of ₹7,767 crore is expected to be collected from Non-Tax Revenues. The State Government expects to receive ₹28,591 crore by way of the share in Central Taxes in Budget 2020-21 and another of ₹15,454 crore as grants from Government of India. These revenue receipts are estimated to be supplemented by gross borrowings of ₹52,918 crore, non-debt capital receipts of ₹40 crore and recovery of loans to the extent of 257 crore.
As per the Revised Estimates of 2019-20, the total Receipts are ₹2,26,088 crore compared to the Budget Estimates of ₹2,30,738 crore. The revenue mobilisation efforts of the State stand at ₹1,77,255 crore, out of which the Own Tax Revenues are estimated at ₹1,18,989 crore. As per the Revised Estimates, the total expenditure is ₹2,26,625 crore. This is an increase of 5.64 per cent over 2018-19.