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Kerala Finance Minister KN Balagopal proposed a slew of resource mobilisation measures in the 2023-24 budget presented in the State Assembly on Friday, the morning after the Centre pruned the State’s borrowing limit by ₹2,700 crore citing its recourse to extra-budget borrowing in the ongoing year through Kerala Infrastructure Investment Fund Board for capital expenditure.
The Finance Minister picked soft targets liquor, petrol/diesel, and motor vehicles for imposing a social security cess and tapped into mining and mineral as well as property tax, among others, to mop up ₹2,955 crore.
This is the highest mobilisation in recent times, and the Finance Minister also proposed a cumulative deficit of just ₹85.25 crore. Additional expenditure at ₹2,640 crore almost marched this exercise.
Property tax revision
The budget envisages property tax revision will do the heavy lifting in the resource mobilisation exercise to yield an estimated ₹1,000 crore.
It proposes a revision of property tax, application fee, scrutiny fee, and permit fee for the construction of residential and non-residential buildings. As part of the initiative, a ‘proper’ method of taxation will be introduced for assessing multiple ownership of houses by a single individual and newly constructed houses not put to any use, the Minister said.
But resources raised in the manner will go to finance the ‘own funds’ of local bodies which can be productively used by them, Balagopal said. Royalty in minor minerals has not been revised since 2015 though it can be revised every three years, he noted.
In light of this, he proposed to revise royalty, penalty, and scientific quantity measurement as per market trends to yield an estimated ₹600 crore, the second largest item of resource mobilisation proposed for 2023-24.
Mining sector, IMFL imposts
Seven changes brought about as part of reforming taxation in the mining sector proposed by the Finance Minister are expected to raise the cost of the construction sector thanks to an accompanying price spiral in associated building materials.
The budget proposes a price differential system for granite (building stone) and dimension stones (granite) based on the type and size of the rock.
It also proposed a social security cess of ₹20 for a bottle of IMFL with an MRP between ₹500 to ₹999, and ₹40 per bottle with an MRP above ₹1,000.
Social security cess
Additional revenue of ₹400 crore is expected through the accretion of ₹750 crore to the Social Security Seed Fund in this manner. Additionally, the budget proposed a social security cess on the sale of petrol and diesel at ₹2 per litre.
An amount of ₹286 crore is sought to be raised in old Abkari arrears, most of which date back from 1949-50 to 2001-02 with many of the defaulters having expired.
There are many court cases in connection with these arrears. Arrears can’t be realised in time due to the pendency of these cases and the stay offered by courts. An amnesty scheme will be introduced to realise these arrears.
Motor vehicle tax
A one-time tax on newly purchased motorcycles with a purchase value up to ₹2 lakh will be enhanced by two per cent. An additional income of ₹92 crore is expected.
One-time tax on new motor cars and private service vehicles for personal use is being revised up to one per cent for those with purchase value up to ₹5 lakh; two per cent for ₹5-15 lakh; and one per cent each in ₹15-20 lakh, the ₹20-30 lakh and the above-₹30 lakh categories.
This is expected to bring additional revenue of ₹340 crore.
Electricity duty up
Electricity duty applicable for commercial and industrial units is proposed to be increased to five per cent to raise ₹200 crore.
The Kerala Court Fees and Suit Valuation Act, 1959 will be amended extending the collection of one per cent additional court fee to more areas. Court fees will be brought within the ambit of e-stamping to facilitate ease of use of citizens to raise ₹50 crore.
The one-time cess levied under Section 10 of Kerala Road Safety Act, 2007 on newly registered motor vehicles will be increased, the Minister announced.
For two-wheelers, it will go up from ₹50 to ₹100; for light vehicles from ₹100 to ₹200; for medium vehicles from ₹150 to ₹300; and for heavy vehicles from ₹250 to ₹500.
This is expected to bring in an additional income of ₹7 crore.
Fair value of land
To bridge the gap between the market value and the fair value, the existing fair value will be increased by 20 per cent.
Stamp duty had been reduced to five per cent for flats/apartments transferred within six months from the date of allotment of building number by the local bodies. This is proposed to be revised from five per cent to seven per cent.
Additional stamp duty rates imposed for the resale of land purchased within three months and six months will be waived.
Among the concessions announced are electric motor cabs and electric tourist motor cabs with a one-time tax ranging from 6-20 per cent of purchase value. This is being reduced to five per cent on par with the one-time tax of electric private vehicles.
Since the one-time tax on all types is fixed at five per cent for 15 years, the existing 50 per cent tax exemption for this period is dispensed with.
Welfare pension untouched
To give a respite to contract carriage/stage carriage vehicle operators who are facing difficulties due to the pandemics, and also to strengthen the public transport system, it is decided to give a tax reduction of up to 10 per cent for such vehicles, the Finance Minister announced. This is expected to result in a revenue loss of about ₹28 crore.
A major omission in the additional expenditure announced was the welfare pension, which came in for widespread criticism from not just the Opposition but also leading budget watchers.
It was against the grain of budgeting principles that tens of lakhs of beneficiaries were ignored even while the Minister potentially ignited an all-round price spiral through cess on petrol/diesel.
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