Whenever short of funds, the finance ministers turn to those drinking liquor, smoking or chewing tobacco. Karnataka’s budget for 2015-16 also taxes alcohol as the budget proposed 6-20 per cent increase in additional excise duty on Indian-made liquor (IML), three percent more value added tax (VAT) on tobacco products and one percent hike in tax rate on diesel and petrol.
Presenting his tenth budget for fiscal 2016 in the state legislative assembly in the Vidhana Soudha , state chief minister Siddaramiah, who holds the finance portfolio, told lawmakers that he was increasing additional excise duty on IML by six to 20 percent to achieve a target of Rs.15,200 crore by March 2016. Similarly, VAT on cigarettes, cigars, gutkha and other manufactured tobacco has been enhanced to 20 percent from 17 percent.
“The objective on increasing VAT on tobacco products is to discourage their use and prevent illegal trade diversion,” Siddaramaiah said in his 170-minute long budget presentation. The chief minister also decided to increase the tax rate on diesel and petrol by one percent to mobilise additional resources for funding the state government’s various social schemes. The dip in international prices of crude and the retail prices which had hurt the state’s finances.
“I propose to increase the tax rate on diesel and petrol by a modest one percent keeping in view the need to raise additional resources.There has been a steady fall in crude oil prices during the last six months in the international market and their benefits have been passed on to consumers. This had significant impact on the state’s revenue collection as tax is levied ad-valorem. But the state restrained from interfering with the tax rates on both the fuels though other states increased rates to safeguard their tax revenues,” Sidddaramaiah pointed out.
The state budget also had several debatable points on which the questions are being raised by the opposition BJP. The state government’s move to announce free education in foreign universities for minority communities with income upto Rs 6 lacs per annum evoked strong reaction from the BJP. Jagdish Shettar, leader of Opposition in the Karnataka assembly termed the move as one which would divide students on the lines of their communities,” The state government could have well made it only on income criteria for all people instead of only for minority community. Last year they appeased minority community with shadi bhagya this year through education loans ” said Jagdish Shettar.
The government with several populist schemes tried to woo the voters for the ensuing local bodies elections. While for the APL ( above poverty line) ration card holders, the state became the first to offer a comprehensive insurance scheme called “ Rajiv Arogya Bhagya” under which 449 medical and surgical procedures will see 70% of the cost being borne by the state government even in private hospitals.“The move will bring a vast majority of the people of the state under a medical insurance” said U T Khader, Health Minister , Government Of Karnataka
The stoppage of mining, has hit the revenues of the state in a big way, compared to the budget estimates of over Rs 1750 cr from royalty in mining , last year the state accumulated Rs 1240 Cr, leaving a big vacuum in the revenues. The mining ban clearly impacting the state’s economy.