Non Tax Revenue definition: While taxation is a primary source of income for the government, it also earns some recurring income other than tax, which is called non-tax revenue. While sources of tax revenue consist of few but bulk direct and indirect taxes, the number of sources of non-tax revenue are very large with wide variance in the quantum of collections per source. Although there are large sources of non-tax revenue, the quantum of collection per source is much less than that of tax collections. For instance, when people avail services offered by the government, like electricity, telecommunication, DTH, broadband etc, they pay bills, which include the share of non-tax revenue as the government provides infrastructure support to facilitate the services. The government also collects interest as non-tax revenue on the loans and funds advanced to states for various purposes. So, the government collects non-tax revenue in return for providing/facilitating any goods or services.
Difference between Tax Revenue and Non Tax Revenue
Tax revenue is charged on income earned by an individual or an entity (direct tax) and on the value of transaction of goods and services (indirect tax). On the other hand, non-tax revenue is charged against services provided by the government. It also includes interest charged on loans advanced by the government for various purposes. Note that it is compulsory to pay a part of the income earned/generated and amount of goods and services consumed as tax. However, non-tax revenue becomes payable only when services offered by the government are availed.
Components of Non Tax Revenue
There are several services provided by the government that creates the sources or components of non-tax revenue. Here are examples of some components of non tax revenues are as follows:
- Interest: It comprises of interest of loans given to states and union territories for reasons like non-plan schemes (e.g. flood control) and planned schemes with maturity period of 20 years such as modernisation of police forces and also interest on loans advanced to Public Sector Enterprises (PSEs), Port Trusts and other statutory bodies etc.
- Dividends and profits: This includes dividends and profits from PSEs as well as the transfer of surplus from Reserve Bank of India (RBI).
- Petroleum license: This includes fees to get the exclusive right for exploration in a particular region. Such fees may be in the form of royalty, share of the profit earned from contact areas during a specific period, Petroleum Exploration License (PEL) fee or Production Level Payment (PLP).
- Power supply fees: This includes fees received by Central Electricity Authority from the supply of power under the Electricity (Supply) Act.
- Fees for Communication Services: This mainly includes the license fees from telecom operators on account of spectrum usage charges that licensed Telecom Service Providers pay to the Department of Telecom (DoT).
- Broadcasting fees: It includes license fee paid by DTH operators, commercial TV services, commercial FM radio services etc.
- Road, Bridges usage fees: This includes receipts through toll plazas on account of the usage of national highways, permanent bridges etc.
- Examination fees: This includes fees paid by applicants of competitive examinations conducted by the Union Public Service Commission (UPSC) and Staff Selection Commission (SSC) to fill up vacancies in government offices.
- Fee for police services: This includes fee received for supplying central police forces to state governments and other parties like Central Industrial Police Force (CISF) to industries etc.
- Sale of stationery, gazettes etc: This includes receipts under ‘Stationery and Printing’ relating to the sale of stationery, gazettes, government publications, etc.
- Fee for Administrative Services: This includes fees received for providing services like audit services, issuance of passport, visa etc.
- Receipts relating to Defence Services: This relates to services provided through Canteen Stores Department (CSD).
Importance of Non Tax Revenue
Tax revenue is the biggest source of revenue for the government, but the amount of tax collection may vary due to the employment situation, consumption levels etc, which the non-tax revenues somewhat balanced with low, but steady flow of revenue from a wide number of sources. Apart from a source of earning for the government, non-tax revenues also help in recovering the cost of services offered.
Sources of Non Tax revenue of State Government
Like the central government, the state governments also provide various services such as:
- Police services
- Home guards
- Administrative services
- Municipal services
- Jobs through state public services boards
- Sale of stationery
The above-mentioned sources become sources of non-tax revenue for the respective state governments.