Tax and Non-Tax Revenue Receipts

The term “Revenue Receipt” is made up of two words revenue and receipts. Any income that does not generate a liability is revenue. For example, if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back)- so cannot be called revenue. However, if the government gets the same money has grant (donation), its revenue receipt because grants are not to be paid back.

Taxes are the most important revenues receipts of the governments. However, some revenue receipts are non-tax revenues such as grants. On this basis, revenue receipts are of two types viz. Tax Revenue and Non-tax revenue.

Tax Revenues

Tax revenues are either from direct taxes or indirect taxes. Direct tax generally means a tax paid directly to the government by the persons on whom it is imposed. Income Tax, Gift Tax, Wealth Tax and Property tax etc. are direct taxes. Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) or any other such tax is an indirect tax. Largest chunk of tax revenues of government of India currently comes from Corporation Tax, followed by Income Tax, followed by Union Excise duties, customs and thereafter service tax.  The collection of service taxes is increasing over the last years. The amount collected under Direct Taxes (Corporate/ Income/ wealth) is larger than that under Indirect taxes.

Non-Tax Revenue

Non Tax Revenue Receipts are those revenue receipts which are not generated by Taxing the public.

• Money which the Government earns as “Dividends and profits” from its profit making public enterprises (PSUs).
• Interest which the Government earns on the money lent by it to external or internal borrowers. Thus this revenue receipts may be in foreign currency as well as Indian Rupees.
• The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc.
• Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.
• Money which the government accrues as fees, fines, penalties etc.
• Grants the Government of India receives from the external sources. In case of the state Governments, it may be the internal grant from the central Government.

In recent times, spectrum auctions have been one of the major sources of non-tax revenues for the government. We note here, that despite it looks that spectrum amount should be a capital receipt, it is shown as a non-tax revenue receipt in budget documents as one time spectrum charges levied on telecom players.

India’s Tax and Non-Tax Revenue

The above graphics shows the tax-revenue and non-tax revenue of the central government as per the latest budget documents. We note from the above chart that (1) Tax Revenue is much higher in comparison to the non-tax revenue. (2) In 2017-18 Budget year, the non-tax revenue are expected to go down. This is mainly due to low expected spectrum receipts and privatization proceeds.