The state budget, presented by Chief Minister BS Yediyurappa, was on expected lines. But it required a tightrope walk by the CM, who was reading out his seventh budget.
As his hands are tied because of GST restrictions, which specify that taxes on a vast array of products and services can only be increased by the GST Council, he resorted to hiking taxes on petrol and diesel by 3 per cent each. This may not have a major impact on the revenues and drive away motorists, as fuel prices in neighbouring states like Tamil Nadu and Andhra Pradesh are higher than in Karnataka.
There is a small relief for lower middle-class families buying low-budget houses costing up to Rs 20 lakh as the stamp duty has been reduced from 5 per cent to 2 per cent.
The excise duty on the “sin good” alcohol has been increased by 6%. This too may not affect the sale of liquor as many people, especially those in Bengaluru, can absorb the hike.
With the fall in the state GDP growth specifically in the industries and services sector and further reduction in the share of central allocation of taxes to the state, the bandwidth of revenue generation has reduced substantially for the state. Considering the constraints, the chief minister seems to have balanced the budget well. However, his real challenge would be when the compensation from central government stops in 2022.
Sanjay M Dhariwal
Chartered Accountant