Faced with serious and unprecedented "difficulties" in resource mobilisation, the Karnataka government has proposed to raise duty on fuel and liquor in the state budget. Karnataka Chief Minister B.S. Yediyurappa, who is also the finance minister, has proposed to hike petrol and diesel prices by Rs 1.60 and Rs 1.59 per litre respectively during the presentation of the state budget for 2020-21 on Thursday.
The reduction in the state's share of the Central taxes by Rs 11,215 crore as per the 15th Finance Commission report, an increase of Rs 10,000 crore in government employee's salary, pension and interest on government loans have resulted in the crunch, the chief minister said while tabling the budget in the Karnataka assembly.
Elaborating on the state's financial position in his budget speech, Yediyurappa said, "The revised budget estimates of the Central government has reduced Karnataka's share in central taxes by Rs 8,887 crore. With collections from the GST compensation cess not being up to the mark, another Rs 3,000 crore GST compensation will be reduced. This has made it difficult to reach the 2019-2020 budget targets and we have had to cut down the expenditure of many departments," said the chief minister.
Karnataka seems to have lost out on its revenue share owing to the 15th Finance Commission focussing more on the development of the poorer states (by giving higher rating to "income distance" parameter). Another drawback has been the state losing the contribution from the Information Technology sector as IT services export is exempted from tax. The IT sector which contributes 25 per cent of Karnataka's GSDP, however, is enhancing the state's domestic product and per capita income compared with other states.
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"The allocation recommendation of the 15th Finance Commission is limited to one year and the complete report for a period between 2021-22 and 2025-26 will be submitted in October 2020. My government will submit a memorandum to the commission to rectify the loss caused to the state and give higher allocations. The state GST collection has grown by 14 per cent and I hope to manage the deficits by stablising state's own resources," said Yediyurappa.
The revenue collection target (2020-21) for stamps and registrations is Rs 12,655 crore (against collection of Rs 10,248 crore in 2019-20), the target for excise stands at Rs 22,700 crore (against a collection of Rs 19,701 crore) and transport at Rs 7,115 crore (against Rs 7,100 crore). The target for the commercial taxes is fixed at Rs 82,443 crore.
