BackDe-jargoned: Non-tax revenue
Non-tax revenue has helped the process of fiscal consolidation
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Accepting the need for fiscal consolidation, the new government has decided to keep the fiscal deficit target at 4.1% of the gross domestic product (GDP) in the current year, as pencilled in the interim budget presented in February. Interestingly, as the economic activity has been subdued in past couple of years, and which has affected tax revenue, non-tax revenue has come in handy and helped the process of fiscal consolidation. “With tax revenues under pressure due to slowdown in economic growth, the rise in non-tax revenues has played a key role in fiscal rectitude in recent years," noted the medium term fiscal policy statement, released with the budget this year. In 2013-14, non-tax revenue grew by massive 45%, and it is estimated to grow at 6.7% in the current fiscal. The total non-tax revenue estimate for the current year is ₹ 2,12,504.61 crore.
What is non-tax revenue?
In the annual budget, the receipts are shown under three broad heads—tax revenue, non-tax revenue and capital receipts. Tax revenue shows resource mobilization under different heads of taxation, such as income tax, corporation tax, customs and service tax. Capital receipt shows the amount raised or expected to be raised during the year under heads such as recovery of loans and debt receipts. The non-tax revenue, which is a substantial chunk of total revenue, comprises of heads such as dividends receipts of the government and interest on loans extended by it. Further, income generated by various ministries of the government against services such as registration of companies, issue of passports, and royalty on off-shore oil fields are also included in non-tax revenue.
In the current year, the government is expecting dividends of ₹ 27,815.10 crore from investments in public sector enterprises and other investments, compared with ₹ 43,074.58 crore the previous year.
Similarly, under the head ‘other administrative services’, which includes audit fee and passport services, the government is expected to raise ₹ 5,255.68 crore, which is higher than the ₹ 4,792.71 crore collected the previous year.
Non-tax revenue has grown from the level of ₹ 76,813 crore in 2005-06 to ₹ 1,93,226 crore in 2013-14. However, growth has not been uniform over the years and there have also been years when it declined compared with the previous year.
Future prospects
While it is true that non-tax revenue has been useful in terms of fiscal consolidation, there are limitations to its growth. “The growth in this component of revenue (non-tax) is limited and it is expected that in the next two years it will register modest growth," stated the medium term fiscal policy statement. Therefore, the government would do well to focus on raising tax revenue and containing expenditure to attain the deficit target in the medium term.
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