Tax Collection, Borrowing woes Make Isaac’s Task tough
Thiruvananthapuram: Kerala Finance Minister Dr. T M Thomas Isaac, in the current fiscal, earmarked an amount of Rs. 24,915 crore in the State Budget by way of loans. This was done as per the State's eligibility to take loans up to 3 per cent of its GDP from the open market every financial year. But Isaac's plan suffered a setback as the Centre slashed Rs. 8325 crore from this already this fiscal. Of the remaining eligibility of Rs. 1920 crore, Isaac has to repay Rs. 1400 crore to the Centre as repayment of a loan availed in 2009. So, there is hardly any scope for Kerala Government to avail any loan during the Jan-March quarter of the current fiscal. In short, Kerala could borrow Rs. 16,590 crore this fiscal as against Rs. 19,500 crore it did in the previous financial year.
Despite the failure to meet 30 per cent growth in tax collections in 2019-2020, Dr. Isaac yet again hopes for a substantial growth in tax collection
At the same time, Isaac's ambition of achieving a 30 per cent growth in tax collections in 2019-2020 failed miserably. Provisional figures indicate a meagre growth rate of two per cent till December 2019. Adding to the State's woes, Centre has been delaying the payment of GST compensation which, according to Isaac, will come around Rs. 3000 crore till February. "All these have led to unprecedented financial crisis," he said.
The State treasury is in serious financial crisis due to the discrimination shown by the Centre and economic slowdown. However, it is not intended to cut expenditures resulting in stagnation of developmental activities. The budget declarations have a higher expenditure of 15 per cent above the revised estimate for 2019-20. A fiscal policy with expenditure cuts will end up in making the possibility of recession a reality, according to Dr. T M Thomas Isaac, Kerala Finance Minister.
It was against this backdrop that the State Finance Minister presented the Budget for the 2020-21 fiscal. Quite interestingly, this time also, Isaac hopes for a growth in tax collection to the tune of 21 per cent.
- The tax rate on motorcycles not exceeding the value of Rs.2 lakh will be increased by 1 per cent and that of motor cars and private service vehicles for personal use not exceeding value of Rs. 15 lakh will be increased by 2 per cent. Rs. 200 crore additional revenue is expected through this measure.
- Electric autorickshaws will be exempted from tax for the first five years.
- 10 per cent increase will be made in the existing fair value. Rs. 200 crore is expected.
- Notified land near large-scale projects will be valued at a maximum of 30 per cent above the declared fair value. Rs. 50 crore is expected.
- Appropriate amendments, on par with other states, will be made in the Registration Act to make registration of title deeds compulsory.
- Revised annual luxury building tax on residential buildings
278.7-464.50 sq. m.
(3000-5000 sq. ft.)
464.51-696.75 sq. m.
(5001-7500 sq. ft.)
696.76-929 sq. m.
(7501-10,000 sq. ft.)
Above 929 sq. m.
(Above 10,000 sq. ft.)
20 per cent rebate will be allowed for those who pay luxury tax in advance for 5 years or above. Additional revenue of Rs.16 crore is expected.
Proposals to boost Startup Ecosystem
In a major announcement that would give further impetus to the growth of Kerala’s startup ecosystem, the Finance Minister has proposed sanctioning of loans to startups without asset security in his budget. “Today, 2300 startups are working across various sectors. Paucity of capital is the biggest issue faced by them. As a solution to this, loans would be made available without asset security to those who have secured work order from government/quasi government/major corporates or institutions,” it said.
The proposals are:
- A scheme for providing 90 per cent of work order as loan, up to a maximum of Rs. 10 crore at an interest rate of 10 per cent. If these are purchase orders, money will be given after discounting them. KFC & KSIDC will give money aross the counter without any collateral security on the recommendation of an expert committee chaired by the IT Secretary. Any loss sustained on account of this will be made good by the government.
- Financial assistance of up to Rs. 1 crore will be provided at the time of development of new product prototypes that are linked to the sustainable development goals of the UN and are also required by any government department. For this, an amount of Rs. 10 crore is provided to KFC. An amount of Rs. 73.50 crore is earmarked for Kerala Startup Mission for 2020-21.
- There has been a criticism that new companies set up their headquarters in Chennai and Bengaluru since the stamp duty in Kerala for starting and merging the companies is higher compared to that in Tamil Nadu and Karnataka. The issue will be included in the Finance Bill to examine and rationalise the rates.
Commenting on the budget, Yusuffali M A, Chairman, LuLu Group International said Kerala budget 2020 looks NRK-focused with far-sighted vision for all round development of the State. Allocation of Rs. 90 crore for the welfare of NRKs is the highest ever by the State Government. It would be very encouraging to the expat community which forms the backbone of Kerala's economy. The efforts to boost the ranking of Kerala in terms of ease of doing business index will surely help in bringing in more investments to the State, he said.
Dr. Azad Moopen, Founder Chairman & MD, Aster DM Healthcare said. Finance Minister Dr. Thomas Isaac has done a commendable job in presenting a balanced budget with focus on development despite financial constraints. The focus of the government on NRKs is evident in the substantial fund allocation for NORKA and other NRK-related areas. Rs. 13 crore fund allocation for Loka Kerala Sabha (LKS) is welcome. Minister Isaac has also given due emphasis to the healthcare sector. The government's focus on palliative care and support for chemotherapy is again highly commendable, he added.
V D Satheesan MLA, Congress Leader, however, has a different take. According to him, Finance Minister Dr. T M Thomas Isaac's priorities are quite baffling. At a time when the real estate and automobile sectors are reeling under crisis, Isaac has chosen both sectors for additional resource mobilisation. Overall, the budget looks like a political statement, however, manifesting the ‘right turn of the Left.’ By undermining the plan process, Isaac is now pursuing the far right policies of the BJP government, he said.