Karnataka CM Siddaramaiah asks for hike in professional tax ceiling and better devolution of funds to states

BENGALURU: Ahead of the union budget, chief minister Siddaramaiah of Congress-ruled Karnataka has sought a five-time increase in the ceiling of professional tax and suggested better management of centrally-devolved funds to the states.

In a memorandum submitted to union finance minister Arun Jaitley last week, Siddaramaiah, who holds the finance portfolio and has presented 10 budgets under three different governments in the state, pointed out that the ceiling of Rs 2,500 per annum on professional taxes has not changed in 28 years. “It is one of the major sources of revenue for our state and many other states. Fourteenth Finance Commission has recommended increase of this ceiling to Rs 12,000 per annum,” he has said, requesting its implementation.

Siddaramaiah has also suggested that the centrally devolved funds to all states be given in larger amounts per month and not just released in one huge chunk in March. "This creates a lot of uncertainty in the month of March where three instalments are expected to be released. Last year, we received only one instalment resulting in a lot of fiscal stress for the state. I suggest that the central government may release 1/13th of the budgeted figure every month till Deember, then prepare revised estimates of its tax collections and release the balance amount in three equal instalments over the last quarter," he said.

Former director of the Institute of Social and Economic Research (ISEC) RS Deshpande agreed with this. "It is a legitimate suggestion. We always receive funds at the dead-end of March and it is very difficult to incur expenditure. However, in the state also, funds are released largely in the last three months, Siddaramaiah should set his house also in order," he said.

Siddaramaiah has also asked Jaitley to allow Karnataka to issue tax-free bonds for irrigation and infrastructure projects. "The central infrastructure financing companies that have been permitted to raise such bonds do not pass on the benefit of lower interest rates to these (state) companies. The purpose of such bonds is not being served," he pointed out.

He sought central investment in the Hyderabad-Karnataka region, special scheme for mega cities like the Bengaluru and central funding for its peripheral road. For the agriculture sector, he sought increase in refinancing to cooperative institutions from NABARD, by raising the ceiling from 40 percent to 60 percent. Deshpande, however, felt that this would not help the agriculture sector, as the problem was in delivery and not in the extent of loans. "It is a politically loaded argument," he added.