Karnataka Proposes Hike in Excise Duty on Fuel, Liquor and Tobacco

The Karnataka budget for the 2015-16 fiscal proposes six-20 per cent hike in additional excise duty on Indian-made liquor, three per cent more value added tax (VAT) on tobacco products and one percent hike in tax rate on diesel and petrol.

Presenting the budget in the state legislative assembly today, Chief Minister Siddaramiah, who holds the finance portfolio, told lawmakers that he was increasing additional excise duty on Indian-made liquor by six to 20 percent to achieve a target of Rs.15,200 crore by March 2016.

The target for Financial Year 2016 from excise duty is Rs 800 crore more than Rs 14,400 crore set for this fiscal (2014-15).

Similarly, VAT on cigarettes, cigars, gutkha and other manufactured tobacco products has been enhanced to 20 per cent from 17 per cent.

"The objective of increasing VAT on tobacco products is to discourage their use and prevent illegal trade diversion," Siddaramaiah said in his 90-minute-long budget presentation.

The chief minister also decided to increase tax rate on diesel and petrol by one percent to mobilise additional resources for funding the state government's various social schemes.

"I propose to increase the tax rate on diesel and petrol by a modest one percent keeping in view the need to raise additional resources," said Siddaramaiah and justified the hike on the ground that the central government had raised excise duty on both the petroleum products on four occasions during the current fiscal.

"There has been a steady fall in crude oil prices during the last six months in the international market and their benefits have been passed on to consumers. This had significant impact on the state's revenue collection as tax is levied ad-valorem. But the state refrained from interfering with the tax rates on both the fuels though other states increased rates to safeguard their tax revenues," Sidddaramaiah pointed out.

The budget, however, proposes to rationalise and revise rates of stamp duty and registration fee on movable and immovable properties to provide relief to the people.