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Revenue: What Does It Mean?
Revenue is referred to as the total income generation on the basis of the sales of goods and services with respect to a country’s primary operations. Revenue is not to be confused with turnover, as the latter refers to the number of times the central government has surplus revenue or undergoes a deficit. Turnover can also be called gross revenue or income.
What are the Sources of Revenue?
In India, we have mainly two types of revenue:
- Tax Revenue
- Non-Tax Revenue
Tax Revenue/Direct Tax Methods:
Union Excise Duties:
It is the most important source of revenue for the central government. These taxes are levied on commodities that are manufactured within the country and do not come under any state excise duties like drugs, liquor, etc. The important products include sugar, cotton, tobacco, cement, textiles, matches, etc.
Custom Duties:
It is the second most important source of revenue for the central government. These taxes are levied on both exported and imported commodities.
Income Tax:
It also comprises an important source of revenue for the government. These taxes are levied on the incomes of working individuals, unregistered firms, etc.
Corporation Tax:
These taxes are levied on the net profits of stock companies. In simple terms, it can be called the income tax on profits of corporate organisations.
Foreign Travel Tax:
These taxes are levied in order to generate revenue as well as preserve the foreign exchange.
Capital Gains Tax:
These taxes are levied on the exchange, transfer or sales of capital assets.
Gift Tax:
These taxes are levied on the gifts of the properties by an individual to their successors.
Non-Tax Revenue/Indirect Tax Methods:
Interest Receipts:
It is the most important source of non-tax revenue for the central government. These taxes are levied on the loans advanced to public sector enterprises like financial and industrial sectors, as well to the state governments.
Surplus Profits of RBI:
These taxes are levied on the surplus profits of the Reserve Bank of India (RBI). However, due to increased borrowing by the central government from RBI in order to finance the Five-Year Plans, these profits have been substantial.
Railways:
These taxes are levied on a portion of the net profits gained by the railways. Apart from this, the railways also pay taxes on the capital invested in them.
Public Sector Enterprises:
These taxes are levied on the net profits of public enterprises such as Bharat Heavy Electricals Ltd. (BHEL), Steel Authority of India (SAIL), Hindustan Machine Tools (HMT), and State Trading Corporation (STC), etc.
GST:
Goods and Services Tax (GST) which is a form of indirect tax, has replaced other types of indirect taxes such as services tax, VAT, etc. Moreover, GST does not increase equity. This tax is remitted to the central government.
Other non-tax revenue sources include the departmental receipts of a multitude of ministries of the government in the form of penalties, fines, fees, etc.
Revenue vs Income: What’s The Difference?
Though they both seem synonymous, revenue and income are not interchangeable in nature. Both are indispensable in terms of estimating the financial status of a firm or organisation.
REVENUE | INCOME |
|---|---|
Total income generation on the basis of the sales of goods and services | Refers to the net earnings or profits |
It can be inferred as the top-line growth of a firm or organisation | It can be inferred as the bottom-line growth of a firm or organisation |
Exclude the expenses | Include the expenses such as taxes, depreciation, etc. |
Conclusion:
In this article, we saw an overview of the revenue system in India. Revenue is referred to as the total income generation on the basis of the sales of goods and services with respect to a country’s primary operation. Turnover can also be called gross revenue or income.
In India, we have two major types of revenue generation sources: tax revenues and non-tax revenues. Tax revenues include union excise duties, income tax, corporation tax, custom duties, etc. Non-tax revenues include interest receipts, taxes on net profits of governmental organisations, etc.
