Sources of Tax Revenue of Union Government

The Union Government’s budget has two broad components, viz;

(a) a revenue budget which shows estimated revenues and dis­bursements on revenue (current) account,

(b) capital budget, which is an estimate of re­ceipts and disbursements on capital account. The estimated receipts on revenue account fall into two broad groups, viz. tax revenue and non-tax revenue.

Tax revenue is derived from the following three sources:

(i) Taxes on in­comes,

(ii) Taxes on property and capital trans­actions, and

(iii) Taxes on commodities and services.

Non-tax revenue is derived from the fol­lowing sources:

(i) Fiscal and other services,

(ii) Interest receipts,

(iii) Profits and dividends of public sector enterprises, and

(iv) General services.

Table 8.1 shows the main trends in the rev­enue of Central Government for selected years:

From a mere Rs. 397 crore in 1950-51, the Central Government’s revenue has increased to Rs. 4,03,872 crore in 2007-08. In fact, during the last 17 years (1990-91 and 2007-8) tax rev­enue has increased by almost 10 times.

Fur­ther, tax revenue as a percentage of GDP showed a consistent rise from 7.4 p.c. to 8.6 p.c. between 1990-91 and 2007-08. Despite tax reform measures introduced step by step since 1991, tax revenue as per cent of GDP showed a decline between 1990-91 and 2002-03. There has also been an improvement in non-tax rev­enue between 1990-91 and 2002-03 with ups and downs in in-between years. It declined to 1.8 p.c. by 2007-08.

The phenomenal increase in the revenue of the Central Government is attributable to three factors:

(i) Introduction of new taxes

(ii) Raising the rates of existing taxes,

(iii) Greater realisation of tax revenue,

(iv) Wid­ening of the tax base and improving tax com­pliance, and

(v) Price inflation.

More and more commodities have been brought under the ex­cise duty and/or sales tax/VAT. Moreover, rates of such taxes have been increased (although the rates of direct taxes have been low­ered and more and more exemptions have been given to certain categories of people). Higher growth in revenues relative to the growth in revenue expenditures has resulted in a decline in revenue deficit of both the Gov­ernments—Central and State.

Non-tax Revenue:

The non-tax revenue of the Government has increased from Rs. 40 crore in 1950-51 to Rs. 82,250 crore in 2007- 2008. As a percentage of GDP, it has fallen from 2.1 p.c. in 1990-91 to 1.8 p.c. in 2007-08.