Public Expenditure And Public Revenue

The expenditure that the Government incur is known as public expenditure. This expenditure can increase with an increase in the activities of the government. The Government’s activities can be classified as Developmental and Non-developmental activities.

Developmental activities involves the creation of assets like constructing roads, bridges, railway tracks, container ports, etc. The expenditure for such activities is known as developmental expenditure.

Non-developmental activities are undertaken for the provision of governmental services like paying interest, pension, defence, etc. The expenditure for such activities is known as non-developmental expenditure.

Tax is a compulsory payment made by the public towards the government. Taxes are of two types based on the shifting of tax burden.

When the burden of the tax is borne by the same person on whom tax is imposed, we call it direct tax. For example, land tax, personal income tax, corporate tax etc. Here the tax payer undertakes the burden of the tax.

When the burden of the tax is shifted from the person on whom it is imposed to another person, we call it indirect tax. For example, sales tax, service tax, central excise, value added tax, etc. Here the tax payer shift the burden to another person.

Goods and Services Tax (GST) was introduced in India on 1^st July 2017 merging different indirect taxes imposed by the central and state governments, into one unified tax system. The policy decisions relating to this tax is made by the GST council in the centre. Union Finance Minister is the chairman of the GST council.

The important functions of the GST Council are to make recommendation on the following matters: -

•What taxes, cess and surcharges that are to be merged into GST.

•Which goods and services that are to be brought under GST.

•Determining the different GST rates.

•The time frame for including the excluded items into GST.

•Determining the tax exemption limit on the basis of total turnover.

The GST system has led to the elimination of multiple taxes, and thereby increased the ease of doing business in India and contributed to an increase in the GDP of the country.

The income of the government is known as public revenue. Public revenue is composed of tax revenue and non-tax revenue. Tax revenue comes from direct and indirect taxes. Non-tax revenue includes fees paid for governmental services, fines and penalties for violating laws, grants form external governments or organisations, interest received from the loans given, and profit from the enterprises operated by the government, like Indian Railways, Postal Services, etc.

The expenditure incurred by the government in undertaking its various activities are known as public expenditure. This expenditure can be classified into two broad categories of developmental and non-developmental. The expenditure incurred in the creation of new assets is called developmental expenditure. For instance, the construction of new roads, bridges, airports, etc. This expenditure is more visible to the general public. While those expenses which are less visible in the public eyes are called non-developmental expenses. These are incurred to provide governmental services like defence, pension, poverty alleviation schemes, etc.

Non-tax revenue forms one of the main sources of public revenue, along with tax revenue. The major sources of non-tax revenue are: -

1. Fees: it is the reward collected for the government’s services like license fees, registration fees, tuition fees, etc.

2. Fines and Penalties: these are monetary punishments meted out to individuals and organisations for violating the laws of the land.

3. Grants: are the financial aids provided by one government or organisations for meeting specific objective. For example, charitable institutions provide grants for the uplift the conditions of certain groups of people.

4. Interest: the Government receives interests for the loans it extended to various enterprises, agencies and countries.

5. Profit: it is the net income Government receives from the enterprises it operates like the Indian Railways, Postal Services etc.

(a) Deficit Budget: Income = Expenditure

Incorrect. Deficit Budget: Income < Expenditure

(b) Surplus Budget: Income < Expenditure

Incorrect. Surplus Budget: Income > Expenditure

(c) Balanced Budget: Income > Expenditure

Incorrect. Balanced Budget: Income = Expenditure

The Government’s policy decisions regarding public revenue, public expenditure and public debt is called fiscal policy. These policies are implemented through the budget.

Some aims of the fiscal policy are: -

•Attain economic stability

•Control unnecessary expenditure

•Create employment opportunities

•Reduce Tax evasion

•Targeted developmental activities

•Reduce bureaucratic delay

•Attain equitable growth in all regions

Public finance is the branch of economics that related to public expenditure, public income and public debt. Fiscal policy is the policy decisions of the Government regarding public finance. Together these two elements determine a country’s progress.

The growth of any country is conventionally measured in the growth of its Gross Domestic Product (GDP), it is the total value of all the goods produced and services provided in an economy in a year. A related dynamic is the operation of demand and supply in the economy. The public finance and fiscal policy help in adjusting consumption patterns in the economy, and thereby facilitating a healthy growth of the country.

For an economy to operate without large troubles it is necessary that demand from the consumers and supply from the producers be equal to each other, as much as possible. This equilibrium is often unbalanced, creating situations of excess demand (demand exceeds supply) or excess supply (supply exceeds demand). Such situations are harmful to the economy in the long run. The Government uses its tools of public finance and fiscal policy to bring back the equilibrium in demand and supply.

For example, when there is excess demand the government increases tax rates to arrest the excess money in the hands of the public, so as to reduce the demand. When there is excess supply, the government does the opposite, it reduces tax rates to increase the money in the hands of the public in order to increase demand to reach the supply level. Thus, the government through its tools of public finance and fiscal policy intervene in the economy to ease situations before it turns detrimental to the country’s progress.

In the first financial year of Goods and Service Tax, the revenue received from this indirect tax has been ₹4,42,562 crores, i.e., four lakhs forty-two thousand five hundred sixty-two crores.

A non-GST bill is issued to a customer when GST cannot be charged in the invoice for the purchase. On the other hand, GST bills are those which has specified GST slab rate in the bill.

When you collect the bills, observe the GST tax rate mentioned in them. If it is mentioned, it is a GST bill, and if it is not it is a non-GST bill.

Based on the above four bills.

The amount of GST paid = GST for Bill 1 + GST for Bill 2 + GST for Bill 3 + GST for Bill 4

GST paid for bill 1 = ₹ 58.08

GST paid for bill 2 = ₹ 14.58

GST paid for bill 3 = ₹ 321.32

GST paid for bill 4 = ₹ 830

Therefore, total amount paid as GST = ₹58.08 + ₹14.58 + ₹321.32 + ₹830

= ₹1223.98

Step 1: Go to the website

If the given web address shows error, try https://www.gst.gov.in/

Step 2: Click on ‘Search Taxpayer’

Step 3: Enter the GSTIN/UIN number

Step 4: Go through the available information

Filling table shows the details of GST filing done by the firm.