The precarious financial position in Karnataka is expected to deteriorate further with the State expected to take a further hit in loss of revenue. While excise duty on liquor and tax on petroleum products — among the State’s two big own revenues — have been lost for nearly three weeks now, GST collections in which the State has a share are also expected to take a massive hit.
Finance Department sources said that a clearer picture on the State’s finances would emerge by April 20 when remittances to the treasury for March is completed. “For March, about 60% of the revenue is estimated since life was almost normal till about March 20. The effect of lockdown in April will be felt in May when figures are collated,” a senior official said.
GST issues
The effect of COVID-19 is to be seen in the light of the State yet to receive GST compensation from December 2019 to March 2020. The dues from the Centre is about ₹2,020 crore for December and about ₹2,800 crore for January, while compensation expected for February and March is around ₹1,500 crore a month each. It adds up to about ₹8,000 crore.
Enquiries in multiple tax collection agencies in Karnataka revealed that while the permanent loss of revenue would be upwards of ₹3,000 crore if the entire month of April is locked down, the other taxes, including registration of properties and vehicles, which are deferred now owing to lockdown, is expected to gather pace once the lockdown is lifted. Officials, however, are skeptical as to how much of these deferred registrations would actually come in, with the general mood of consumption having come down.
Liquor consumption down
The government received between ₹65 crore and ₹70 crore a day based on the liquor consumption pattern, and this has been lost since the third week of March. Clubs were asked to shut down on March 14 and the State government then banned sale of liquor in bars on March 21 before shutting down wine shops on March 24.
Sources in the Excise Department estimated that the losses could between ₹1,700 crore and ₹1,800 crore if the lockdown remains for a month.
For the Commercial Tax Department, the Karnataka Sales Tax on petroleum products is estimated to come down between ₹1,000 crore and ₹1,200 crore a month. This apart, sources said that it would be the GST that will be worst hit if the entire April is locked down. On an average, Karnataka collects ₹7,000 crore a month as GST, and this collection, a part of which comes back to the State, is likely to be affected much. “The date for filing returns for a section of traders has now been deferred. On one hand, GST collection comes down drastically, and on the other, the previous GST returns has been deferred, which means collection in treasury comes down,” an official said.
No registrations
With registration of properties not taking place, sources in the Department of Stamps and Registration said that these could be deferred and registration could take place when the lockdown opens.
“On an average, the department collects between ₹800 crore and ₹900 crore a month, and this now stands deferred,” said a source. All the deferred transactions may not fructify once the lockdown is opened, the official acknowledged. The Transport Department, officials said, was losing ₹18 crore to ₹19 crore a day coming from vehicle registration and other revenue sources. Besides, the department has also deferred payment of vehicle tax that are due now. “All these are being treated as deferred income and will be realised later,” an official said.
Apart from the revenue earning departments, urban and rural local bodies will take a deferred hit as tax payments have been deferred.
(With additional inputs from Suchith Kidiyoor)
