KOCHI: Faced with a severe funds crunch, Finance Minister K N Balagopal, in his budget on Friday, is likely to announce plans to boost revenue by adopting different tax structures on land depending on its use. Sources said states such as West Bengal had adopted this model a long time back, and Kerala which is severely short of funds may have no option but to adopt a similar model to boost the revenue.
“Kerala’s tax revenue from land was Rs 400 crore last fiscal while a state like West Bengal, which has a little over twice our land area, collects six times the revenue from land tax,” said a source. Simply put, under the proposed new structure, a farmer using his 15-acre land for spinach cultivation will pay a much lower land tax as compared to say a commercial complex or a retail mall in the same area of land, according to the sources. The land tax in corporation area is Rs 2/acre and Rs 4/acre for those holding above two acres.
In the municipality area, the tax is Rs 1/acre for those holding up to six acres and Rs 2/acre for above two acres. In the panchayat area, the rate is as low as Rs 0.50/acre for up to 20 acres and Rs 1/acre for those holding above 20 acres. Minister Balagopal, speaking at various forums recently, admitted that he would be forced to raise taxes given the tight financial position of the state exchequer.
To his credit, he has cut down expenses on various fronts. D Narayana, former director of Gulati Institute of Finance and Taxation, said the revenue spending in general and economic sectors was cut by over 20% of budget estimates, while the same in social sectors was cut only by 12%.
The state’s financial crisis is also accentuated by the GST compensation arrears by the centre. In a recent function, he said Kerala alone has an arrear to the tune of Rs 12,000 crore. The five-year period for GST compensation ends in June this year, and still the Centre has not settled all arrears, he had said.
What it means
Under the proposed new structure, a farmer using his 15-acre land for spinach cultivation will pay a much
lower land tax than say a commercial complex or a retail mall in the same area of land.
Minister K N Balagopal had recently admitted that he would be forced to increase taxes given the tight
financial position of the state exchequer.