Non Tax Revenue: Revenue Receipts, Components, Importance and Sources

Revenue Receipts

Revenue receipts are those payments that don’t result in debt or other obligations to the government. The key elements of revenue receipts, which are divided over the long term into direct taxes, businesses, and indirect taxes such as customs duties, excise taxes, and service taxes, are tax revenues. On the other hand, Non Tax Revenues are the regular money that the government receives from sources other than taxes.

• The regular revenue receipts have an impact on the income statement’s business profit and loss.
• These government earnings, which are regarded as the current income receipts for the government from all sources, do not result in the creation of any assets or liabilities.

☛ Distinguish between Capital Receipts and Revenue Receipts

If a receipt meets both of the following two requirements, it is regarded as a revenue receipt:

• It shouldn’t subject the government to any liabilities. For instance, the government’s taxes are considered revenue receipts, however, any money borrowed by the government is not considered a revenue receipt.
• There shouldn’t be any asset decline.

These revenue receipts fall into two categories: tax revenue and Non Tax Revenue, and they are not redeemable.

Tax Revenue

Taxes are mandatory payments that individuals and businesses must make to the government without receiving any immediate benefits in return. Tax revenue is the total of all receipts from taxes and other government-mandated obligations. Either direct taxes or indirect taxes are the sources of them. Direct taxes and indirect taxes make up the majority of the government’s regular revenue sources.

Non Tax Revenue

While taxes are the government’s main source of funding, it also receives some additional recurring income known as Non Tax Revenue. Direct and indirect taxes make up the majority of the sources of tax revenue, although there are several non-tax sources with a wide range in the amount of money collected from each one. Despite the fact that there are many sources of non-tax income, they all generate significantly less money than taxes do.

• Interest on loans and cash advanced to states for a variety of purposes is also collected by the government as Non Tax Revenue.
• In order to provide/enable any products or services, the government collects Non Tax Revenue.

Non Tax Sources of Revenue of State Government

The state governments of the various states receive non-tax money from the sources listed below. State governments, like the federal government, offer a range of services, including:

• Sale of stationery
• Home guards
• Jobs through state public services boards
• Electricity
• Gazettes
• Municipal services
• Police services
• Administrative services

Components of Non Tax Revenue

The government offers a number of services that generate the sources or elements of Non Tax Revenue. Following are some instances of Non Tax Revenue components:

• Interest: It includes interest on loans given to states and union territories for things like non-planned projects (like flood control) and planned projects with a 20-year maturity period, like modernizing police forces, as well as interest on loans given to public sector enterprises (PSEs), port trusts, and other statutory bodies, among other things.
• Petroleum License: This includes the cost of purchasing the only right to conduct exploration in a specific area. These fees could take the form of a royalty, a portion of the profits made from contact areas over a certain time period, a Petroleum Exploration License (PEL) price, or a Production Level Payment (PLP).
• Dividends and Profits: This covers transfers of Reserve Bank of India surplus and dividends and profits from PSEs (RBI).
• Fees for Communication Services: This mostly refers to the licensing fees from telecom providers paid to the Department of Telecom on spectrum usage fees (DoT).
• Power supply fees: Included in this are the fees that the Central Electricity Authority has received from the provision of electricity under the Electricity (Supply) Act.
• Broadcasting fees: Among these are the license fees paid by DTH providers, commercial FM radio services, commercial TV services, etc.
• Road, and Bridges usage fees: This comprises payments made through toll booths for public roads, long-term bridges, etc.
• Fee for Administrative Services: This includes payments made in exchange for services like auditing and issuing passports and visas, among other things.
• Receipts relating to Defence Services: This has to do with the services offered by the Canteen Stores Department (CSD).
• Fee for police services: Included is the fees paid to the federal government for providing central police forces to state governments and other organizations, such as the Central Industrial Police Force (CISF) for businesses, etc.
• Examination fees: This covers the fees paid by candidates for competitive exams held by the Staff Selection Commission (SSC) and Union Public Service Commission (UPSC) to fill openings in government positions.
• Sale of stationery, gazettes, etc: This covers invoices filed under Stationery and Printing for the purchase of stationery, newspapers, official publications, etc.

Non Tax Revenue: Importance

Tax revenue is the largest source of income for the government, but it can vary in amount depending on factors like employment, consumption, and other factors. Non Tax Revenue helps to balance this out with a slow but consistent flow of income from a variety of sources. Non Tax Revenues assist in recouping the cost of provided services in addition to serving as a source of income for the government.

Difference between Tax Revenue and Non Tax Revenue

Direct taxes are levied on an individual’s or an entity’s income, as well as on the price of the products and services exchanged (indirect tax). Non Tax Revenue, on the other hand, is billed against government services. The interest incurred on loans provided by the government for a variety of purposes is also included. Keep in mind that you must pay taxes on a portion of your income, as well as the cost of the goods and services you use. On the other hand, Non Tax Revenue is only due while using government services.

Non Tax Revenue UPSC

India’s taxation system is a significant component of the country’s economy. Candidates studying for the UPSC 2023 Exam should be well-versed on the topic of Revenue Receipts and Non Tax Revenue. To prepare for this topic, one should refer to Economy Notes of UPSC.

Non Tax Revenue UPSC Questions

Question: Which among the following is a government’s non-tax revenue source?

1. Gifts and grants
2. Fees, fines and penalties
3. Interest and dividend on investments
4. All of the above

Answer: Option D