Karnataka on Thursday announced sharp increase in taxes on fuel and liquor to compensate huge cut in Central pool of taxes, GST and 15th Finance Commission allocation.
This will result in hike in petrol, diesel and liquor prices from April 1. The hike in taxes were announced by Chief Minister B.S. Yediyurappa in the budget for 2020-21.
The tax on petrol will be up from 32% to 35% and diesel from 21% to 24%. This will translate to petrol price becoming costlier by ₹1.60, and diesel by ₹1.59 per litre. Mr. Yediyurappa also increased excise duty on Indian Made Liquor (IML) across 18 slabs by six per cent.
In his initial remarks, Mr. Yediyurappa acknowledged constraints imposed on account of cuts in central funding which has necessitated being frugal in some departments. He said that the State would soon write to the Centre on financial allocation being cut in the 15th Finance Commission and appeal for more funds.
“The State’s share in central taxes has come down in 2019-20 as per the revised budget estimates of the Central government. Due to this reason, there is a reduction of ₹8,887 crore to Karnataka. Therefore, State’s revenue resources have been reduced. Apart from this, ₹ 3,000 crore GST compensation will also be reduced as collections from the GST compensation cess are not as expected. It has become difficult to reach the 2019-20 budget targets due to these reasons. To manage this situation within the bounds of the Karnataka Fiscal Responsibility Act, an inevitable situation has arisen this year to cut the expenditure of many departments,” he said.
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