The world today looks almost completely different from how it did a few decades ago. We have come a far way and have upgraded our complete lifestyle on this path. But one of the things that remain an integral part of our lives is our dependence on our government to provide us with an optimum standard of life. Often the intricacies and details of how these facilities are provided to the citizens are not understood to the common man. This discrepancy in the functioning of government leaves room for evils such as corruption. An effective way to tackle such problems would be to educate the citizens on how the government earns its money and what does it do with this money.
The government earns a major proportion of its revenue through taxation. Various laws are implemented by the legislature to collect taxes from the populace, which accumulate wealth with the government. This money is extracted from a variety of sources like individuals, private companies, co-operative societies,etc. A part of the revenue which is not in the form of taxes are gained through aid or loans from foriegn governments, royalties from the private sector for utilizing state owned natural resources, fines from criminal offenders, tolls on roads and fees for licence registration, water bills, passports, visas and other such channels.
The primary reason for collection of taxes is so that the state can provide citizens with basic amenities, which is achieved through responsible government spending. Expenditure covers all investments, consumptions and payments of the government. Among the significant components of the expenditure of government are factors such as defense, infrastructure, healthcare and other socio economic policies.
SOURCES OF REVENUE
Tax revenue: This money is collected by the government often as a way of payment for their services. Some of the top revenue generator taxes collected by Indian Government are as follows:
INCOME TAX: The Income Tax Act of 1961 allows the government to levy tax on any income other than agricultural income. The department of Income Tax is the biggest revenue generator for the government. Over the years, various amendments were made to the law. In the year 2016-17, individuals earning an income less than Rs.2.5 lakh were declared exempt for income tax. For the purpose of tax collection a taxpayer files a document called tax returns in which he makes an annual statement of income and personal circumstances to aid the tax authorities to assess the tax amount. In the year 2016-17, as much as 3.67 crore income tax returns were filed.
The Finance Act, 2017 inserted a new section 139AA in the Income Tax Act, which made it mandatory for every eligible person to link the Aadhaar No. with their pan card and to quote the Aadhar no. in the Income Tax return. However, in the case of K.S.Puttaswamy v. Union Of India the issue of this provision violating the fundamental right of privacy was brought up in the Supreme Court. The court upheld the validity of the provision, saying that privacy is not an absolute right and is not immune to limitations and it passes the triple test for privacy assessment as it is in the legitimate interest of the state to prevent tax evasion.
GOODS AND SERVICES TAX: GST is an indirect tax imposed by the government on the supply of goods and services. The tax came into effect from July 1, 2017 and subsumed almost all indirect taxes,including central excise duty, additional customs duty, value added tax and Octroi. This tax is imposed in all the steps of the production process, but it is refunded to all except the final consumer. Pre GST , the statutory tax rate for all goods was about 26.5% but post GST, it is expected to be in the range of 18%. The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of all states and the Center. The total number of taxpayers under the GST regime were about 1.14 crore in October 2018
However, the implementation is criticised by World Bank for being too complex and by Indian businessmen for too much documentation and administrative effort.
At the end of last year, about 700 cases were filed against the tax all over the country. In one such plea, Abicor and Binzel Technoweld Pvt Ltd. V. Union Of India, the Bombay High Court asked the government to fix the technical glitches in the tax while calling the GST regime is not “tax friendly”..
Non Tax Revenue: The revenue collected from taxes is much higher in comparison to non tax revenue. The Center expects the non tax revenue to increase 11.2% in the financial year 2020-21. The proceeds from dividends or surplus of Reserve Bank of India and nationalized banks and financial institutions are expected to rise along with revenue from communication services that relate to licence fees from telecom operators. So far this year the government has mopped up Rs.35,532 Crore from the target of Rs. 80,000 Crore which has been raised mainly through Bharat-22 exchange traded fund (ETF) and Central Public Sector Enterprises (CPSE) and a few buybacks.
MEANS OF EXPENDITURE
Agriculture: The overall allocation to the agriculture sector was increased from Rs 51,576 crore to Rs 58,080 crore in the 2018-2019 financial year. Funds are allocated for schemes like Pradhan Mantri Krishi Sinchai Yojana and Pradhan Mantri Fasal Bima Yojana. The government has also established a micro-irrigation fund in NABARD to achieve “per drop more crop”.
Healthcare: The government announced the flagship programme Ayushman Bharat–one of the world’s largest government-funded healthcare programs. It was allocated 1,200 crore, providing a cover of upto 5 lakh to the insured families. National Health Mission, received the highest allocation and constituted 55% of the total allocation of the Ministry of Health and Family Welfare. The Health ministry received an allocation of 54,600 crore, which is a 2% increase from the last financial year. Yet, overall the Health Ministry ended up receiving funds less than what it did the previous fiscal year.
Housing & Infrastructure: Pradhan Mantri Awas Yojana, which aims at building 2 crore houses by 2022, got an allocation of 64,500 Crore in budget 2018. UDAN scheme was launched as a means of making air transport affordable for the common man. Bharatmala- the biggest highway construction plan and Sagarmala- a port modernization scheme has been getting impetus from the government. Budget 2018 saw the largest ever allocation of 1.48 lakh crore to the Indian Railways.
In spite of the tax reliefs and incentives provided by the government have exceeded those in the previous years. Several economic agencies have criticised them to have fallen far short than the requisite target. The criticism is largely focused on the tax cuts to larger corporations that seem to come in the way of the common man obtaining its basic requirements to live a dignified life. This has divided the country into two schools of thought, one believing that we are set on the right path as far as socio economic development is concerned, while the others are of the strong opinion that not enough is being done in this aspect and the sector needs to be prioritized by the government.