Karnataka - Commercial tax collection slips

Though there was a decline in the growth rate in the collection of commercial tax in the first seven months of the current financial year, the Government is confident of achieving the target set.

Despite the decline in the growth rate, the amount collected as tax in the first seven months of this fiscal year was higher than in the corresponding period last year. The tax collected till October end this year was Rs. 8,872.99 crore, an increase of Rs. 1,022.11 crore over the amount collected in the first seven months of 2006-07.

The target set for 2007-08 is Rs. 16,973.79 crore. It was Rs. 14,190.51 crore in 2006-07, and the amount collected was Rs. 14,255 crore.

 Growth rate down

However, the growth rate in the collection of tax declined in the first seven months of this fiscal year because of the ban on the collection of special entry tax and sale of lotteries, and reduction of one per cent in Central Sales Tax (CST), which is levied on inter-State sales by the Union Government. The loss on account of the ban on lotteries was Rs. 63 crore. The growth rate so far this year is 13 per cent against the 21.99 per cent recorded in the last fiscal year, officials in the Commercial Department told The Hindu.

In the Budget, the Government had set a target of Rs. 73.71 crore under special entry tax. But collection of the tax stopped since April this year after the Karnataka High Court, on March 30, 2007, declared the Karnataka Special Tax on Entry of Certain Goods Act, 2004, unconstitutional and directed the Government to refund the amount it had collected so far.

To reform the indirect tax portfolio, the Union Government reduced the CST by one per cent from April 1, 2007. The loss to the exchequer on account of the reduction of the CST from 4 per cent to 3 per cent is estimated at Rs. 400 crore. The Centre had agreed to compensate the State for possible revenue loss on account of the reduction in the CST.

In order to track tax evaders, the Department of Commercial Taxes has strengthened its tax collection wing in its nine divisions in the State. Yet a large number of dealers, traders and shopkeepers are evading tax in major cities and towns. There are about 3.85 lakh dealers registered under the value added tax scheme in the State.