GST tweaks, guarantee schemes may widen Karnataka’s revenue deficit: Report

Belagavi: Hit by GST rationalisation, low tax collections and expenditure on the ‘guarantee’ schemes, Karnataka may see its revenue deficit widen in the current fiscal, the Mid-Year Review of State Finances has warned.

Revenue deficit is the gap between the government’s income and expenditure on day-to-day operations. The government has estimated a revenue deficit of Rs 19,262 this fiscal.

“...the recent GST rate rationalisation and non-realisation of tax on mines is expected to lower revenue collections compared to the estimated targets, potentially increasing the revenue deficit in the current financial year,” the Mid-Year Review, tabled in the Assembly on Wednesday, stated.

The government has estimated “a significant reduction” in revenues, according to the report.

“For the current year, a shortfall of around Rs 5,000 crore is projected, and for the full year, the estimated shortfall is around Rs 9,000 crore. This is in addition to the revenue loss of about Rs. 9,500 crore due to the non-merger of the cess,” the report stated.

Further, the government is likely to miss Rs 3,000 crore from mining taxes. The Karnataka Mineral Rights and Mineral Bearing Lands Tax Bill, with which the government wanted to levy the tax, is awaiting Presidential assent.

The government has estimated revenue receipts of Rs 2.92 lakh crore in 2025-26. Between April and September, receipts stood at Rs 1.28 lakh crore.

“The increase in committed expenditure, including the state’s spending on guarantees and various welfare schemes, has increased the revenue expenditure,” the report stated. “Simultaneously, the shortfall in revenue receipts on account of GST rate rationalisation has further constrained the state’s fiscal position.”

The government said it is pursuing “expenditure rationalisation initiatives are being pursued to contain non-essential spending and protect allocations for priority development sectors” to keep revenue deficit narrower.

All revenue-generating departments have seen growth over the previous year, except Stamps & Registration. “The decline in revenues is primarily due to a slowdown in real estate activity,” the report said, adding that collections may improve in the second-half with “anticipated recovery” in property deals.

‘Good monsoon’

The government hopes that “adequate rainfall” will “further boost agricultural output while strong service and industrial performance” can sustain the state’s economic momentum.

“Inflation in the state remained under control during the first half of the fiscal year, aided by a good monsoon that helped keep food prices low,” the report said.