Karnataka CM spares common man; targets liquor industry for more money

The budget size has increased 13.48% to Rs 1,38,008 crore

With the General Elections just round the corner, Karnataka chief minister Siddaramaiah today spared the common man from new taxes in his budget for 2014-15.

However, the chief minister has proposed to tax the liquor consumers by introducing a value added tax of 5.5 per cent on liquor sold by bar and restaurants, clubs, lodging houses and star hotels to mobilise additional resources. He has also proposed to increase additional excise duty on beer from 122 per cent to 135 per cent.

Siddaramaiah, who presented a record 9th budget as finance minister and second as chief minister, continued his knack of presenting a revenue surplus budget. He has projected a revenue surplus of Rs 281.28 crore, which is 52.79 per cent lower than the budget estimates of Rs 596 crore in 2013-14.

He, however, announced some relief measures for the trade and commerce. "I propose to continue tax exemption on paddy, rice, wheat, pulses and products of rice and wheat for one more year from April 2014. Reduce tax on scented arecanut powder other than mixtures from 14.5 per cent to 5.5 per cent," Siddaramaiah said in his close to three hour-long budget speech.

The budget also proposed to increase the registration limit from the present Rs 5 lakh of annual turnover to Rs 7.5 lakh as a relief to small dealers and to prepare ground for introduction of the GST which envisages a higher threshold for registration.

The chief minister has particularly targeted the liquor trade to mobilise additional resources. He has proposed to increase the licence fee on primary distilleries, Indian liquor manufacturing distilleries and breweries by 50 per cent and on retail liquor shops to Rs 3 lakh from Rs 1 lakh.

"As part of the rationalisation effort, I propose to increase luxury tax on minimum daily rent to Rs 750 from Rs 500," the chief minister, who also holds the finance portfolio, said.

The budget proposes to enhance the limit for interest-free short term agriculture loans from Rs 2 lakh to Rs 3 lakh and charge just 3 per cent interest for loans above Rs 3 lakh and up to Rs 10 lakh.

A grant of Rs 650 crore has been provided for interest subsidy.

The budget also proposes to exempt stamp duty on alternate sites allotted by the Bangalore Development Authority (BDA) in lieu of the land freed from government control (denotified) and on sale deeds executed under the state government's aerospace policy 2013-23.

In the transport sector, the budget proposes to levy Rs 500 per seat per quarter on motor cabs costing Rs 15 lakh and registered in other states but entering Karnataka by obtaining tourist vehicle permit instead of paying life time tax.

There will also be no entry tax on ethanol for mixing with petrol.

The overall budget size has increased 13.48 per cent to Rs 1,38,008 crore for 2014-15 compared to Rs 1,21,611 crore estimated for 2013-14. The state plan size has gone up 34.7 per cent to Rs 65,600 crore from Rs 48,685 crore for 2013-14.

Total receipts are pegged at Rs 1,36,249 crore, of which Rs 1,11,039 crore is revenue receipts while Rs 25,210 crore is capital receipts. Total expenditure is Rs 1,38,008 crore of which revenue expenditure is Rs 1,10,757 crore and capital expenditure is Rs 20,491 crore. The state would be repaying debt to the tune of Rs 6,760 crore.

Fiscal deficit of the state is estimated to be Rs 20,041 crore, which is 2.92 per cent of GSDP. The total liabilities at Rs 1,57,681 crore at the end of 2014-15 are estimated to be 23.01 per cent of GSDP. "This is within the limit of 25.2 per cent for 2014-15 mandated in Karnataka Fiscal Responsibility Act," Siddaramaiah said.

Despite showing a shortfall of Rs 934 crore in the state's own tax revenues for the current fiscal (2013-14) at Rs 61,530.41 crore, the government aims to achieve a growth of 13.55 per cent at Rs 69,870 crore for 2014-15. "I am confident of achieving higher growth in tax revenues in the next fiscal as the economy is expected to improve and better tax compliance," the chief minister added.

Besides higher collection in state's own tax revenue, the government also expects to receive Rs 16,560 crore by way of the share in the central tax and another Rs 20,135 crore as grants from government of India.