Explainer: How much of the Estimated receipts does the Government actually earn?
Sai Krishna Muthyanolla
July 20, 2019
Every year during budget, the government estimates both revenues and expenditure. But, how much of these estimated revenues turn into actual receipts for the government?
The Union Budget for the financial year 2019-20, was presented by Union Finance MinisterNirmala Seetharaman on 5 July 2019. There have been varyingopinions expressed about the different aspects in the budget and the proposedallocations to different sectors, which underlines the priority of the currentgovernment and path they intend to take.
A Union budget not only provides the vision for the future with detailsabout the proposed government spending and the prospective revenues, but alsoprovides a reflection on the actual expenditure and revenues of the union. Whilemost of the focus after presenting a budget is about the new proposals of thegovernment in regard to budget allocation, schemes, taxes etc., it is alsoimportant to look into the actual government spending and revenues (also calledas receipts) during the previous financial year.
Actuals provide an authentic reflection of the performance
Every year, in the budget, the government presents its proposedallocation of funds for various sectors and outlines the sources of revenuethat would meet these expenditures. During the course of the year, variousministries and departments spend on different schemes and activities. Therecould be scope for revision in the allocation originally made in view of anynew development or proposed scheme. At the end of financial year, thespending’s and the revenues are submitted for audit and these audited figuresare included in the budget as “Actuals”.
Let us understand at the ‘Actual” figures presented in the union budget.It has to be noted that, these actual figures presented in a budget belong toprevious financial year (FY), since the actuals can only be complied by anydepartment only after completion of the financial year and also needs to gothrough an audit. Hence the Actuals provided in 2019-2020 budget belong to thefinancial year 2017-18.  We will now lookinto the propose numbers in the FY 2017-18 budget and the Actuals beingpresented in the current budget for that year.
In the first part of the series, we will look into the Actual receipt’svs Estimated receipts
Actual total receipts for 2017-18 is less than the estimates
As per the budget primer of PRS Legislative Research, Government Receipts consists of Revenue Receipts and Capital Receipts. Revenue receipts are considered as those government receipts which do not (i) create liabilities or (ii) reduce assets. Taxes, interest and dividend received on government investments, cess, receipts for the government services provided etc. are the sources of revenue receipts.
The Revenue receipts of the government includes:
Capital Receipts are those receipts which (i) create liabilities (borrowing)or (ii) reduce assets (ex. disinvestment.)
As per Budget at a glance 2017-18 document, the estimate for total receipts was ₹ 21,46,735 Crores, whereas the actuals for FY 2017-18, released with the current year budget is ₹ 21,41,973 Crores. This is a deficit of ₹ 4762 crores when compared to the estimates or a shortfall of less than 0.5%. But this deficit has breached the 5% mark for 2018-19, going by the provisional numbers presented in the Economic Survey of 2018-19.
Compared to the estimates, actual figures suggest a deficit in Non-Tax
receipts with marginal increase in Tax receipts
The actual revenue receipts for 2017-2018 are less than the estimated revenue receipts by ₹ 80,538 crores. The estimated Revenue receipts for 2017-18 was ₹ 15,15,771 crores, whereas the actual revenue receipts for 2017-18 is ₹14,35,233 crores.
The actual tax revenue for 2017-18 is ₹ 12,42,488 crores, which is higher than the estimated Tax revenue of ₹ 12,27,014 crores i.e. difference of ₹ 15,474 crores. It has to be remembered that 2017-18 was the first year of GST implementation.
However, this increase in actual tax revenue could not cover up the deficit of total revenue, due to the larger difference in the Non-Tax revenue.
The actual non-tax revenue is ₹ 1,92,745 crores compared to the estimated revenue of ₹ 2,88,757 crores i.e. a difference of ₹ 96,012 crores.
Receipts through Corporate Taxes and GST cover the fall in actual
receipts from other tax sources
Revenue through taxes forms a major share of the total revenue receiptsof the government. Nearly 85% of the revenue receipts are through taxes.  Corporate tax, Customs, Excise, Tax on incomeother than corporates and Service tax etc. are the major sources of Taxreceipts.
Furthermore, since 01 July 2017, Goods and Services Tax (GST) was implemented and hence does not have any estimates figures for 2017-18. However, it does reflect in the actuals.
The estimates for revenue through Taxes was ₹ 12,27,014 crores, while the actual receipts through taxes amount to ₹ 12,42,488 crores. i.e. ₹ 15,474 crores more than the estimate.
However, the scenario of higher actuals than the estimates is not across the sources. The actual tax receipts for Income Tax, Customs, Excise etc. are less than the estimated figures for 2017-18. The combined actual receipts of these three sources is ₹ 8,18,635.57 crores against the estimate of ₹ 10,93,155.27 crores. This deficit of 2,74,519.7 crores is covered up in the higher actual receipts of (i) Corporate tax (ii) newly introduced GST.
The Government of India earned ₹ 4,42,561.43 crores in 2017-18 through the newly introduced GST. This coupled with actuals of Service Tax (₹ 81228.37 crores) is more than the estimated receipts through service tax i.e. ₹ 2,75,000 crores.
Actual less than the estimates across major heads under Non-Tax receipts
Non-Tax revenues are other sources of revenue receipts for thegovernment. These receipts include:
The estimated
Non – Tax revenues for 2017-18 amount to ₹ 2,88,757.07crores, whereas the actual Non-Tax Revenues for 2017-18 is ₹ 1,92,745.
A major portion of the difference betweenthe estimates and the actuals is due to the deficit of revenue from Dividendsand Profits. The total receipts
estimated for 2017 -18 through dividend and profits was ₹ 1,42,430.49crores, whereas the actual amount was ₹ 91,360.47 crores i.e.  shortfallof ₹ 51,070crores from the estimated receipts. The surplus from RBI is the highest sourceof non-tax revenue for the government of India. Few experts cite that the costs
incurred due to demonetization to beone of the reasons for the low surplus when compared to the estimated figures.
Theactual receipts for Economic services (₹ 61,368.74 crores) is also lessthan the estimate (₹ 92,234.63 crores).
Actual Capital Receipts are higher, but due to borrowings & other
liabilities
The estimated
Capital receipts for 2017 -18 were ₹ 6,30,964crores and the actual
capital receipts are ₹ 7,06,740 crores i.e. 75,776crores more than the estimated figures. While the recovery of loans has fared better than estimate, the majorcontribution towards higher actual figures for capital receipts compared to theestimated, is due to “Other receipts” and “Borrowings & other liabilities”.The actual capital receipts through Saving Bonds (₹ 25,208.52 crores) is significantlyhigher than the estimates (₹ 2,970.66 crores) which has contributed towards increase in the numbersfor “Other receipts”.
What does all this mean?
To summarize, the insignificant deficit of less than 0.5% is largely dueto two factors.  One is the higher GSTearnings in 2017-18. Since 2017-18 was the first year of implementation andthat too only for 9 of the 12 months in the financial year, there were noestimates for GST in the original budget for 2017-18. This led to an increaseon this front. Two is the increase in borrowings and other liabilities. Boththese factors dwarfed the fall in other areas of tax revenue such as customs& excise duty and non-tax revenue under ‘dividends & profits’. A betterpicture would emerge when we have the numbers for 2018-19.