Friday, March 11 2005 14:03 Hrs (IST) - World Time -

Bangalore: Waiver of interest and penal interest on cooperative farm loans, switchover to the Value Added Tax (VAT) regime and increased allocation to agriculture, health and rural development have been proposed in the Karnataka budget for 2005-06.

Presenting the Congress Janata Dal-Secular (JD-S) coalition Government's second Budget in the Assembly today (Mar 11, 2005), Deputy Chief Minister Siddaramaiah, who holds the finance portfolio, said interest and penal interest accumulated upto March 2005, on short-term, medium and long-term cooperative loans availed by farmers upto March 2004, would be waived costing Rs 450 crore to the State exchequer.

Announcing that the State is "all set" to introduce VAT in place of sales tax on all commodities except petrol, diesel, aviation turbine fuel and sugar cane from April 2005, he said the likely revenue loss in the first year of introduction of VAT was about Rs 2,160 crores.

However taking note of the representation made by trade and industry, Siddaramaih exempted from VAT eight commodities including paddy and rice, wheat and pulses for one year, besides seeds, papad and branded bread and bun.

Continuing with the coalition Government's thrust on rural sector, he increased the allocation for irrigation by Rs 918 crore to Rs 3,942 crore in 2005-06, stepped up allocation for health sector by 18 per cent and for education by 11 per cent to Rs 4,800 crore from Rs 4,300 crore.

Siddaramaiah also said the State will continue to provide subsidised rice and wheat at Rs three per kg, and earmarked Rs 500 crore for the scheme, a major component of the Common Minimum Programme (CMP).

On the power front, Siddaramaiah provided for Rs 1,750 crore as subsidy, but with a view to checking commercial losses, proposed 100 per cent metering in all sectors which included the subsidised sectors.

In its attempt to switchover to the new VAT regime, he proposed several rationalisation measures and announced a fresh tax amnesty scheme to clear sales tax arrears.

Siddaramaiah also proposed to levy special entry tax on all goods where there could be trade diversion because of some neighbouring States which may not be part of the VAT regime from April 2005.

He also increased taxes on 'multi-axle, articulated' goods vehicles and lifetime tax on two wheelers costing more than Rs 50,000, but sought to introduce separate clause of tax for air conditioned buses, covered by All India tourist permits in order to encourage tourism.

Siddaramaiah also reduced tax on tea to four per cent, and on interstate sale of two wheelers, three wheelers and plastic stitching yarn to one per cent to encourage sales from Karnataka and composition taxes and show tax based on the category on cinema halls and its location.

As an additional revenue mobilisation move, he proposed to allow the export of draught beer outside Karnataka, but did not propose any major changes in excise policy or levy of additional taxes, except simplifying and rationalising the existing tax structure.

He sought a vote on account for the four month period ending July 31, 2005.

The total receipts in the revised estimates for 2004-05 is Rs 33,332.84 crore as compared to the Budget estimates of Rs 32,065.99 crore.

The total expenditure will jump to Rs 33,273.08 crore in the revised estimates as against Rs 31,591.88 crore in the Budget estimates for the current fiscal.

After taking into account the surplus in the public account, Siddaramaiah said, the closing balance is expected to be Rs 72.66 crore as against the budgeted Rs 73.32 crore.

In the Budget estimates for 2005-06, he excepts total receipts to be Rs 34,592.06 crore, comprising revenue receipts of Rs 29,218.47 crore and capital receipts of Rs 5373.59 crore.

The total expenditure is likely to be Rs 34,615.15 crore of which revenue expenditure is estimated at Rs 28,364.01 crore and capital expenditure at Rs 6251.14 crore.

Siddaramaiah said the Government expects to raise Rs 18,680.16 crore in tax revenue and Rs 4090.30 crore in non-tax revenue. In addition, Government expects to raise Rs 1269 crore from market borrowings, Rs 2191.12 crores as total loans from the Centre and Rs 1015 crores from RBI and other financial institutions.

Committing to the target under the Fiscal Responsibility Act in 2005-06, he said, the revenue surplus next fiscal is estimated to be Rs 854.46 crore, which is 0.52 per cent of Gross State Domestic Product (GSDP) and Fiscal deficit to be at Rs 4714.46 crore, which is 2.86 per cent of GSDP.

With the interest payment on off Budget borrowing to be at Rs 791.02 crore, the consolidated revenue surplus is budgeted to be Rs 63.44 crore and the closing balance at Rs 49.57 crore.