Simplified Laws Guide to Taxation and Legal Concern Amidst bigger news like the Ukraine Russia war, election results of 5 states, new Covid variants, etc., Karnataka Budget could not find much space in the media and minds of people. As there were not many takers, it had a shelf life of less than 24 hours! Did you hear anyone talking about the State budget?
In a way, the State budget has no big relevance as well. For example, the budget of the Karnataka Government is Rs 1,89,977 Crores, some of the large corporates like Reliance Industries earn this much money in just one quarter of the year!
Having said that, we should know the sources of income for State Governments. Here is a glimpse of the estimated total revenue of the Karnataka Government during the next Financial Year 2022-23
Total Revenue – Rs.1,89,977 Crores
State GST (SGST) is the major source of revenue to the State Government. The estimated SGST is Rs.53,220 Crores.
Share of Taxes from Central Government and Grants is the second revenue stream. The Central Government shares 41% of its tax collections (such as income tax, customs duty, excise duty, GST, etc.) with the States, using devolution formula among all the States. This formula assigns weightage for population, area, income, etc., to arrive at the share of each state. For Karnataka, the estimated Central Share is Rs.30,933 Crores and the Grant-in-Aid is worth Rs.22,281 Crores.
Stamp Duty and Registration Fees of Rs.15,000 Crores. A major portion of this amount comes from the Duty collection on the sale of properties. My rough estimate says, properties worth a total value of Rs.1,50,000 Crores are sold in the State in a year! Around 10% of the total revenue comes from the Sub-Registrar’s Office! Now you know why the Revenue Ministry is the most sort after department!
Tax on Vehicle Sales Rs.8006 Crores. To buy a vehicle costing Rs.20,00,000, one has to pay Rs.4,00,000 as Road Tax, i.e., 20% of the Ex-Showroom Price. That is why, you end up paying over 25% extra (towards Road Tax, Insurance, etc.) than the Car Ex-Showroom Price mentioned in the advertisements!
Tax on sale of Oil used for the human engine! Rs.29,000 Crore is collected from the sale of liquor. The more you drink, more the taxes; drink more to partner in the growth of the nation!
Tax on sale of Oil such as Petrol and Diesel Rs.17,600 Crores. State Government gets more from the tax on Liquor than the tax on fossil fuels.
Tax on Profession Rs.1150 Crores. This includes the amount paid by the employees (Rs.200 per month deduction from the salary) and the annual fees paid by the employers.
The tax on Electricity is Rs.2800 Crores. Shocking numbers!!!
Interest, Dividends, and other receipts – Rs.9,987 Crores. State Government is a shareholder in Public Sector Undertakings (earns dividends), they also give loans (earns interest), letout buildings (earns rent), provide services (earns fees, fines, penalties, etc.)
Now the question – Is this much revenue sufficient to run the State? No. The government has an estimated total expenditure of Rs.2.62,000 Crores, leaving a shortfall (deficit) of Rs.72,000 Crores. In other words, if the total money required for spending is Rs.100, the government is capable of earning only Rs.73, and the balance of Rs.27 is coming from loans/borrowings.
Where do they spend? Do they really spend? We will see this in Part II.
