Revenue generation sources and sharing

1. Welcome to this session on
Revenue for both Union and State Government
Mandatory Training of AAOs for Promotion as SAOs
By J.K. Saha, AAO/MB

2. Government Receipts

3. Revenue receipts
* .

4. Capital Receipts
Capital receipts of the government are those monetary receipt which
satisfy the following two characteristics:
* These receipts create a liability for the government.
* These receipts cause a reduction in the assets of the government .

5. Session Overview
 Revenue for both Union and State Government
 Revenue Receipts
 Revenue Basket
 Analysis of Tax Revenue of States
 Revenue (Tax) Buoyancy
 Extra-Budgetary Resources

6. Learning Objective
 Given access to the background material on
 Revenue Receipts
 Revenue Basket
 Analysis of Tax Revenue of States
 Revenue (Tax) Buoyancy
 Extra-Budgetary Resources
 Participants will be able to understand the definition of these terms and their use
in the Combined Finance and Revenue Accounts

7. References
 CAG’s CFRA Report 2016-17
 Budget at a glance 2020-21
 Controller General of Accounts – Accounts at a Glance document 2017-18

8. Introduction
How Accounts Are Compiled
 Union Government accounts are compiled by the Controller General of Accounts
from the accounts received from the Pay and Accounts Offices (PAOs) attached to
the Ministries and Departments of the Government of India
 The Accounts of the Railways, P&T and Defence also forms part of the Union
Government Accounts
 The accounts of the State Government are compiled by the Accountant General of
the State concerned based on the transactions reported by the treasuries and other
accounts rendering units like Public Works Divisions, Forest Divisions, etc

9. Introduction Contd…
Finance Accounts
 Finance Accounts of both the Union Government and State Governments are
prepared annually. These are audited by the Comptroller and Auditor General of
India.
 The Accounts present the receipts and expenditure of the Government for the
year, together with the financial results disclosed by the revenue and capital
accounts and public debt.
 The liabilities and assets of the Government are worked out from the balances
recorded in the accounts.

11. Revenue Receipts

15. Worldbank

22. The Revenue Basket
(Source CAG’s CFRA Report 2016-17)

23. The income of the government from all its sources is called public revenue.
According to Dalton has defined public revenue as public receipts in a broad sense
and public revenue in a revenue sense.
Tax Revenue
Non-tax revenue
Commercial revenue
Administrative revenue
Grants and gifts
Other income

24. What do you mean by TAX ?
“The tax is the price which each citizen pays to the state to
cover his share of the cost of the general public services which
he consumes.” - De Marco

25. IncomeTax
Why the government actuallycollects Taxes?????
T
axCollectors
“The tax is the price which each citizen pay to the state to cover
his share of the cost of thegeneral
public services which he will consume.” - De Marco
Service
tax
Corporation tax
Sales
tax

26. TAX REVENUE
DIRECTTAXES INDIRECTTAXES
CORPORATION
TAX
INCOME TAX EXPENDITURE TAX SERVICE TAX
CUSTOM DUTIES
EXCISE DUTIES
SALES TAX

27. Direct Taxes
Corporation Tax
Income Tax
Service Tax
Expenditure Tax
These taxes against profits earned by businesses during a given
taxable period.
A tax that governments impose on financial income generated by all
entities within their jurisdiction.
It is a tax which is payable on service provided bythe service provider.
Expenditure tax is a taxation plan that replaces the income tax .This tax
is based on the rate of spending.

28. Indirect Taxes
CUSTOM DUTIES
EXCIES DUTIES
SALES TAX
Customs Duty is a type of indirect tax levied on goods
imported into a country as well ason goods exported from a
country.
Excise duty is the indirect tax levied by the state on the
manufacture or production of goods in India .
Sales Tax is a tax, levied on the sale or purchase of
goods.

29. Non-tax revenue
Government revenue other than tax revenue is called tax revenue.
Non-tax revenue
Commercial revenue
Administrative revenue Grants and gifts Other income

30. Commercial revenue
All types of revenue which are derived by government
from public enterprises by selling their goods and
services are called commercial revenue.

31. Administrative Revenue
Fees Fines
Escheat
A fee is a payment to
thegovernment for the
services that is renders
to the people.
It refers to that income
of the state which arises
out of the property left
by the people without a
legal heir.
Fines are those
payment which is
made by law breakers
to the government by
a economic
punishment

32. Meaning:- If on account of government activities a value of any property increases
and if government levies a tax on this enhanced value, it is known asspecial assessment .
According to Taylor,
“Special assessment are charges imposed upon property benefited
by such improvements the amount of charge
been determined by pro-rata or pro-rata benefits ”
When government undertakes certain activities of public improvements like
construction of roads etc. they may confer the
1.Common benefit to the community as a whole, and
2.Special benefit for those whose properties are taken.

33. Grants and Gifts
Gifts are voluntary contribution from private individuals to the government fund
for specific purposes. In federal countries, the central government gives
grants-in –aid to the state government and
the state government gives grants to the local bodies for carrying functions
successfully, or for undertaking specific activity. These grants may be
unconditional as well as for specific purposes.
Grants are received from foreign countries in the form of foreign aid, which
may be military economy and technical type.

34. Other Incomes
Other Incomes of the government includes the following –
•Income from Public Property - Government gets income every year from all the public
property. Example- Agricultural income and income from forest and mines etc.
•Deficit Financing –It is also one of the sources of financing and government expenses.
These excess amount may be used for public welfare .
•Duties –Duties are levied in intoxicate articles, so that the consumption of such
articles may be minimized. Such duties are collected on liquor, opium, Bhaang etc.
•Voluntary Loans –Loans are taken for meeting out the expenses.
It may be voluntary or compulsory.
•Rates –Whenever a tax is levied by local bodies and its boundaries, it is known as
rates. The rates differ from place to place.

35. Overview of Receipt, Expenditure & Deficit of Union Govt
(2018-19)
 Total receipts during 2018-19 were Rs.2315113 crore. Gross tax receipt was
Rs.2078665 crore, of which Rs.761454 crore(36.63% of gross) was transferred to
States and Union Territories as their share of taxes.
 Net tax revenue retained by the Central government was Rs.1317211 crore.
 Total non-debt receipts were Rs.1665695 crore(net of transfer to States), leaving a
gap of Rs.649418 crore as the Fiscal Deficit which was met through borrowings
during 2017-18.
 Total Government expenditure from Consolidated Fund of India was Rs.2315113
crore, of which, revenue expenditure was Rs.2007399 crore (87%) and capital
expenditure Rs.307714 crore (13%). Expenditure increased by 11% from Rs.2141818
crore in the year 2017-2018
Source : Accounts at a Glance 2017-18 – cga.nic.in

36. Financial Highlights
2018-19 (Rupees in
Crore)
S.No Description 2018-19 2017-18
YoY
Growth
1 Revenue Receipts 1552916 1435078 8%
2 Tax Revenue(Net to Centre) 1317211 1242487 6%
3 Non-Tax Revenue 235705 192591 22%
4 Capital Receipts 112779 115678 -3%
5 Recoveries of Loans 18052 15633 15%
6 Other Receipts 94727 100045 -5%
7 Total Receipts (1+4) 1665695 1550756 7%
8 Revenue Expenditure 2007399 1878679 7%
9 Of which Interest Payments 582648 528952 10%
10
Of which , Grants for creation
of Capital Assets 191781 192520 0%
11 Capital Expenditure 307714 263139 17%
12 Total Expenditure (8+11) 2315113 2141818 8%
13 Revenue Deficit (8-1) 454483 443601 2%
14
Effective Revenue Deficit (13-
10) 262702 251081 5%
15 Fiscal Deficit (12-7) 649418 591062 10%
16 Primary Deficit (15-9) 66770 62110 8%

37. The Revenue Basket – Union (Tax Revenue)
Till 2016-2017 From 2017-2018
• Corporation Tax • Corporation Tax
• Income Tax • Income Tax
• Expenditure Tax • Expenditure Tax
• Wealth Tax • Customs Duties
• Securities Transaction Tax • Securities Transaction Tax
• Union Excise Duties • Central Goods & Service Tax
• Service Tax • Integrated Goods & Service Tax
• Customs Duties • Goods & Service Tax Compensation Cess
• Union Excise duties on certain products
• Other Taxes • Other Taxes

38. The Revenue Basket – Union (Non-Tax Revenue)
• Interest Receipts – (1) States/UTs (2) Departmental Commercial
Undertakings (3) PSUs (4) Others
• Dividends and Profits – (1) PSUs (2) LIC of India (3) Nationalised Banks (4)
Reserve Bank of India (5) Others
• Non-Tax Revenue of UTs
• Other Non- Tax Revenue

39. Miscellaneous Capital Receipts
 Miscellaneous Capital Receipts comprise of sale proceeds of
Government assets, including disinvestment of Government
holding in Public Enterprises

40. TAX REVENUE 2018-19 (Rupees in Crore)

41. NON –TAX REVENUE 2018-19 (Rupees in Crore)

42. CGST
20%
IGST
1%
GSTCompCess
4%
CorporationTax
29%
IncomeTax
21%
Customs
5%
UnionExciseDuties
10%
Dividends_Profits
5%
Others
5%
CFI (CONSOLIDATED FUND OF INDIA) RECEIPTS 2018-19

43. State Revenues (2019-20)

44. (Source CAG’s CFRA Report 2016-17)
(All States Average – Rs.67295 crore)
Financial Year 2016-17
Average =Total Receipts /No. of states &UTs

45. (Source
CAG’s
CFRA
Report
2016-17)
(below average)
Average =Total Receipts /No. of states &UTs

46. (Source
CAG’s
CFRA
Report
2016-17)
(average and above)
Average =Total Receipts /No. of states &UTs

47. (Source
CAG’s
CFRA
Report
2016-17)
Rupees
in
Crore NCT of Delhi tops the list in having the highest own tax revenue to Total
revenue receipts ratio followed by Maharashtra, Haryana, Karnataka and Tamil
Nadu. The state of Nagaland had the lowest ratio.

48. (Source
CAG’s
CFRA
Report
2016-17)
Rupees
in
Crore

49. Revenue (Tax) Buoyancy1
 As GSDP (Gross State Domestic Product) grows, the ability of the State
Government to mobilize its own tax revenue should also increase.
 Buoyancy of a parameter is calculated as the ratio of the rate of growth of the
parameter to the GSDP growth rate
1Elasticity or degree of responsiveness of a fiscal variable (Revenue Receipts or state’s Own Tax
revenue) with respect to a given change in the base variable (GSDP).

50. Trends in Tax Buoyancy (Centre)

52. * classification given by Centre to
assist in the development of
those states that face
geographical and socio-economic
disadvantages
*

53. High Tax Revenue Buoyancy States
 State’s own Tax revenue buoyancy in respect of Puducherry is the highest followed
by Tamil Nadu, Karnataka and Punjab among the general category states.
 Jammu & Kashmir has the highest own tax buoyancy among both the general
category and the special category states. Nagaland, Meghalaya and Sikkim follow
Jammu and Kashmir among the special category states. In case of Revenue
buoyancy while Jammu and Kashmir tops the list, Jharkhand, Uttarakhand and
Karnataka follow.

54. High Tax Revenue Buoyancy States
 Some of the determining factors for high tax revenue buoyancy can be the
 size of tax base
 friendliness of the tax administration
 reasonableness and simplicity of tax rates
 One year’s tax buoyancy cannot be conclusive enough to determine a tax system’s
efficiency.
 There are many other factors at play in either boosting or pulling down tax
buoyancy.
 There is also a lag effect of taxation policies that can be captured only by examining
the trend over a longer period of time.

55. Extra Budgetary Resources
 Refer to Resources of the Government other than general budget support and
internally generated resources
 Are those financial liabilities that are raised by Public Sector Undertakings for
which repayment of entire principal and interest is done from Government
budget
 Such borrowings are made by state-owned firms to fund government schemes
but are not part of the official budget calculations.
 Extra budget borrowing is excluded from the fiscal deficit calculations, but at the
same time, are added to the total debt of the government

56. Extra Budgetary Resources
Para 3.1.2 of CAG’s Report on Compliance of FRBM Act, 2003 (Report No. 20 of 2018)
 Central government has "increasingly resorted to off-budget financing" for revenue
spending.
 (a) fertilizer arrears/bills funded through 'special banking arrangements' (SBA)
 (b) food subsidy arrears/bills of the FCI funded through its market borrowings and
 (c) implementation of irrigation scheme (Accelerated Irrigation Benefits Programme
or AIBP) through borrowings by the NABARD under the Long Term Irrigation Fund
(LTIF) set up in 2016-17.

57. Thank You