Leader of the Opposition VD Satheesan addresses a protest organized by the UDF against the tax proposals in the Kerala budget, in Thiruvananthapuram. Photo: Special Arrangement
bBudget week is the time of the year when the state of public finances comes under constant scrutiny. This year has not been any different in Kerala.
Opposition led by Congress ahead of budget presentation by Finance Minister KN Balagopal UDF released white paper Which presented a dismal picture of the state’s finances. Mr. Balagopal presented the budget for 2023-24 on February 3 Tax proposals galore and social security cess The relatively unexpected features of his budget speech on petrol, diesel and liquor, created a political storm. Chief Minister Pinarayi Vijayan and Mr. Balagopal have staunchly defended the proposals, but the UDF is not convinced.
Accusing Mr. Vijayan’s government of putting excessive burden on the people, four MLAs UDF announces indefinite agitation Protests inside and outside the state assembly. Leader of the Opposition, VD Satheesan announced that the protest would continue until the tax proposals and cess were scrapped.
Water charges were also increased on the same day the budget was presented, this did not help the government on the public relations front. Anticipating an additional ₹2,955 crore increase in revenue, Mr. Balagopal announced, among other things, a ₹2 cess on petrol and diesel, a ₹20 per bottle cess on Indian-made foreign liquor ₹500-999, and ₹40 per bottle. On liquor above ₹1000. The government also increased one-time tax on motorcycles, cars and private service vehicles, one-time cess on newly registered motor vehicles and electricity duty applicable to commercial and industrial units. Fair value of land increased to 20% and stamp duty from 5% to 7%.
In the weekend following the budget presentation, there was some speculation that the CPI(M)-led LDF government would go soft on some of the proposals. But the next Monday, the UDF announced a ruckus in the House, which Mr. Balagopal reacted sharply who denied that the tax hike was unnecessarily sharp. They argued that the government’s hand has been forced by the inconsistent fiscal policies of the central government, which has sharply reduced the state’s share from the divisible pool. He argued that the cess on fuel and liquor was for the “greater good” and was vital to the continuation of social security pensions for more than 6 million people. Besides, the tax on liquor has not been increased in two years, Mr. Balagopal said. He said the decision to increase tax in case of motor vehicles has been taken after reviewing the rates in neighboring states.
On 9 February, Mr Vijayan called a press conference where he supported the budget proposals and criticized the Center for attempting to strangle the state financially. The next day, Kerala Pradesh Congress Committee President K.K. Sudhakaran urged the people to boycott the fuel cess.
On the broader fiscal front, Kerala is showing encouraging signs of post-pandemic recovery. According to the Economic Survey 2022 tabled in the Vidhan Sabha, the GSDP at constant prices in 2021-2022 is expected to grow to 12.01% from -8.43% in the previous year. Agriculture and allied sectors witnessed a growth of 4.64% in 2021-22 as compared to 0.24% in 2020-21. Industry grew from -2.82% to 3.87% and the service sector grew from -14.44% to 17.3%.
While this is good news, a report by the Comptroller and Auditor General tabled in the Assembly on February 9 further largely supports the observation of several leading economists that Kerala has been slow to effectively tap available tax sources over the years , And they are hiding the ground reality by taking an easy way out with fresh levies.
The CAG’s joint compliance report on the revenue sector for the period 2019-21 found that the government has been unable to collect Rs 21,797.86 crore in revenue till March 31, 2021. outstanding for more than five years. Some of these even go as far back as 1952.
The projections on the tax collection front have improved significantly this year as the government recently launched a revamped State Goods and Services Tax department. But how the LDF government deals with the turmoil on the political front, especially when the assembly resumes on February 27 after a two-week break, remains to be seen.