As the Congress government in Karnataka has begun implementing its five guarantees promised in the party’s poll manifesto, experts in different fields have suggested increasing the entertainment tax, much of which comes from the well-off, and increasing non-tax revenue, largely in the form of user charges for services, for meeting the expenditure.
The government has to mobilise additional revenue for the implementation of the five guarantees. It is estimated the government needs at least ₹60,000 crore a year for implementing the guarantees. Chief Minister Siddaramaiah, who has been holding a series of meetings with different departments, would present the State Budget next month.
How it compares
Presently, Karnataka has 30% entertainment tax, which is low compared with that in large States such as Bihar (50%); Uttar Pradesh (60%), Maharashtra (45%). Even a 10% increase in entertainment tax will help the government to increase its revenue basket, argued economist R.S. Deshpande, former Minister and IIM-B professor B.K. Chandrashekar, and the former director of the Karnataka State Natural Disaster Monitoring Centre V.S. Prakash. The government levies entertainment tax on commercial shows, movie tickets, sporting events, music festivals, amusement parks, exhibitions, theatre shows, and other private festivals.
Experts have also suggested an increase in non-tax revenue. The Fiscal Management Review Committee has noted that the non-tax revenue collection has not improved. In the Mid-term Fiscal Plan (2023-27), the committee suggested the Finance Department revise all major non-tax revenue sources, the user charges/fees for those services which have not been revised for many years.
The State’s own non-tax revenue is estimated at about ₹11,000 crore. The royalty from mines is estimated at ₹7,500 crore for 2023-24, an increase of 15% over revenue estimates of 2022-23.
Noting the 22% level of debt to the Gross Domestic State Product, experts advised the government against borrowing to meet the expenditure on the guarantees. The government’s outstanding debt stands at ₹5,53,419 crore in the 2023-24 Budget or ₹4,97,978 crore as shown in the revised estimates of 2022-23.
Stamps and registration
They also suggested an increase in stamps and registration fees. Owing to COVID-19, the previous BJP government had provided a 10% rebate on guidance value in 2022. The revenue collection from the Stamps and Registration Department is estimated at ₹19,000 crore in 2023-24 as against collection of about ₹17,000 crore in 2022-23.
The State government’s estimated revenue during 2023-24 was ₹2.25 lakh crore. Mr. Siddaramiah’s view was that Karnataka would be capable of meeting the expenditure on guarantees because the State Budget presented by Mr. Bommai touched ₹3.1 lakh crore in 2023-24. “Every year the Budget size grows by ₹25,000 crore. So, by the end of the five-year term, the Budget size will be ₹4.5 lakh crore. So, it is possible to implement the guarantees,” he said.
