Fiscal-policy / Fiscal Policy / Revenue Receipt and Revenue Expenditure..
Revenue Receipt and Revenue Expenditure..
In government finance, the categorization of finances into revenue and capital streams helps in understanding the nature of receipts and expenditures.
Here's a breakdown of the revenue account, focusing on revenue receipts and revenue expenditure:
- Revenue Account:
- Receipts: Revenue receipts consist of income generated by the government through various sources.
- Taxes:
- Direct Taxes: Examples include income tax and corporation tax.
- Indirect Taxes: Examples include GST (Goods and Services Tax), basic customs duty, etc.
- Non-Tax Resources:
- Profits, interest receipts on loans given, dividends (from Public Sector Enterprises, RBI, etc.).
- Expenditure: Revenue account expenditure comprises various categories of government spending.
- Interest Payments: Payment of interest on loans.
- Defence: Expenditure related to national defense.
- Subsidies: Financial support provided to specific sectors or individuals to encourage certain activities or to maintain affordability.
- Public Administration: Operating costs related to government administration.
- Financial Grants to States: Grants provided to State Governments, including those under Article 275(1) of the Constitution.
- Examples include grants in aid for State disaster response funds and grants in aid for rural and urban local bodies.
- Revenue Expenditure:
- Revenue account expenditure, in conventional terms, is often synonymous with maintenance and consumption expenditure, as well as welfare expenditure.
- It does not directly contribute to the creation of assets; instead, it addresses routine and recurring expenses necessary for the day-to-day functioning of the government and the provision of welfare services.
Key Points:
- Revenue Receipts: Income earned through taxes (direct and indirect) and non-tax resources (profits, interest, dividends).
- Revenue Expenditure: Expenditure on interest payments, defense, subsidies, public administration, and financial grants to states.
- Nature of Revenue Expenditure: Focuses on maintenance, consumption, and welfare expenditure, without directly creating assets.
Understanding the composition of the revenue account is crucial for assessing the financial health of the government and evaluating its fiscal policies in terms of revenue generation and spending priorities.
