Haryana Public Finance and fiscal Policy
FISCAL POLICY
Fiscal Policy is prepared by Government and consists of various expenditures and revenues. Fiscal policy deals with the revenue and expenditure decisions of the government.
The government fiscal policy is used to stabilize the level of output and employment through changes in its expenditure and taxes. The government attempts to increase output and income and seeks to stabilize the ups and downs in the economy.
In the process, fiscal policy creates a surplus (when total receipts exceed expenditure) or a deficit budget (when total expenditure exceeds receipts) rather than a balanced budget (when expenditure equals receipts).
Fiscal policy can achieve important public policy goals like growth
- Equity
- Promotion of small scale industries
- Encouragement to agriculture
- Location of industries in rural areas
- Labour-intensive growth
- export promotion
- development of sound social and physical infrastructure
The two main instruments of fiscal policy are:
(a) Government Expenditure
(b) Government Receipts
Expenditure :- It s divided into :-
Revenue expenditure and
Capital expenditure
Receipts :-They are divided into
Revenue receipts
Capital receipts
TAX REVENUES
India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.
Non Tax Revenues
Public Finance in Haryana
Revenue receipts and Revenue Expenditure
The revenue receipts are collected through State’s own tax and non-tax revenue, share in Central taxes and grant-in-aid from Centre. During 2016-17, the revenue receipts of the Govt. of Haryana is expected to be 62,955.53 crore against the estimated revenue expenditure of 75,235.88 crore, thereby showing a deficit amounting to 12,280.35 crore (BE). The revenue receipts of the State Government was 38,012.08 crore against the revenue expenditure of 41,887.10 crore with a deficit amounting to 3,875.02 crore in 2013-14. It was 40,798.66 crore against the revenue expenditure of 49,117.87 crore depicting a deficit amounting to 8,319.21 crore in 2014-15.
State’s Own Sources
There are two major components of State’s own sources i.e.
State’s own tax revenue and
State’s own non-tax revenue.
The State’s own sources are expected to rise from 30,541.66 crore in 2013-14 to 48,507.96 crore in 2016-17 (BE). The State’s own tax revenue expected to increase from 25,566.60 crore in 2013-14 to 40,199.51 crore in 2016-17 (BE) whereas the State’s own non-tax revenue are expected to increase from 4,975.06 crore to 8,308.45 crore during this period.
Taxes
Total tax comprises of
- i) State’s own tax revenue (OTR) and
- ii) State’s share in Central taxes
(SCT). State total tax is expected to increase from 28,909.84 crore (25,566.60 crore OTR + 3,343.24 crore SCT) in 2013-14 to 46,388.31 crore (40,199.51 crore OTR + 6,188.80 crore SCT) in 2016-17 (BE).
Tax Revenue
Tax revenue reveals that sales tax is the major source of tax revenue and it is estimated at 28,750 crore in 2016-17 (BE) as compared to 25,000 crore in 2015-16 (RE). Sales tax is estimated to increase by 15 percent in 2016-17 (BE) over 2015-16 (RE). The contribution in tax revenue from State excise is estimated at 5,251.58 crore in 2016-17 (BE) as compared to 4,567.59 crore in 2015-16 (RE) showing an increase of 14.97 percent in 2016-17 (BE) over 2015-16 (RE). The contribution in tax revenue from stamps and registration is estimated at 3,700 crore in 2016-17 (BE) as compared to 3,096.90 crore in 2015-16 (RE).
State’s Share in Central Taxes
State’s share in Central taxes consists of, grant for Plan schemes, grant under the award of Central Finance Commission and other non-plan grants. The share in Central taxes is estimated at 6,188.80 crore in 2016-17 (BE) against 5,496.22 crore in 2015-16 (RE). It shows that share in Central taxes is likely to increase by 12.60 percent in 2016-17 (BE) over 2015-16 (RE).
Grant-in-Aid
Apart from the valuable amount from Central taxes, Finance Commission has made recommendations regarding grant-in-aid to the States for some specific purpose. The State is expected to receive about 8,258.77 crore as grant-in-aid in 2016-17 (BE) against 8,386.71 crore in 2015-16 (RE). It indicates that grant-in-aid is likely to decrease by 1.53 percent in 2016-17 (BE) over 2015-16 (RE).
CAPITAL RECEIPTS AND CAPITAL EXPENDITURE
Capital Receipts
The capital receipts consist of three parts namely; (i) recovery of loans (ii) miscellaneous capital receipts and (iii) public debt (Net). The public debt has a major contribution in the capital receipts. Capital receipts has increased from 9,907.43 crore in 2013-14 to 10,922.90 crore in 2014-15 and it is expected to be 25759.01 crore in 2016-17(BE).
Capital Expenditure
Capital expenditure consists of capital outlay and lending (disbursement of loans and advances) and it relates to the creation of assets. The capital expenditure of the State has increased from 4,710.21 crore in 2013-14 to 13,546.08 crore in 2016-17 (BE) .
The total developmental expenditure comprising of social services like education, medical and public health, water supply and sanitation, social security and welfare, labour and employment, etc and economic services like agriculture & allied activities, irrigation & flood control, power, industries, transport, rural development, etc. The developmental expenditure is estimated at 65,841.76 crore in 2016-17(BE) as against 65,345.31 crore in 2015-16, showing an increase of 0.76 percent in 2016-17 (BE) over 2015-16 (RE).
The total non-developmental expenditure comprising of administrative services, organs of State, fiscal services, interest payments, pensions and miscellaneous general services etc. is estimated at 22,692.65 crore in 2016-17 (BE) as compared to 19,384.23 crore in 2015-16 (RE). The total non-developmental expenditure is estimated to increase by 17.07 percent in 2016-17 (BE) over 2015-16 (RE).
Financial Position
The net transactions on year’s account is estimated to show a deficit of 43.46 crore in 2016-17 (BE) as against the deficit of 61.09 crore in 2015-16 (RE). The revenue account is estimated to show a deficit of 12,280.35 crore in 2016-17 (BE). The net deposits of small savings, provident fund etc. are estimated to show a surplus of 1,572 crore in 2016-17 (BE) as compared to 1,345 crore in 2015-16 (RE).
Goods and Service Tax (GST)
GST is one indirect tax for the whole nation, which will make India one unified common market. The GST intends to subsume most indirect taxes under a single taxation regime.
GST, will replace multiple state and central taxes to create one national market and single tax in the country. This bill seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax and also state taxes such as value added tax, entry tax and luxury tax, to create a single, pan-India market.
GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. This is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes.
Our Constitution empowers the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Further, it empowers the State Governments to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. In addition, central sales tax (CST) is levied on inter-State sale of goods by the Central Government, but collected and retained by the exporting States. Further, many States levy an entry tax on the entry of goods in local areas.
This multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry.
In order to simplify and rationalize indirect tax structures, Government of India attempted various tax policy reforms at different points of time. A system of VAT on services at the central government level was introduced in 2002. The states collect taxes through state sales tax VAT, introduced in 2005, levied on intrastate trade and the CST on interstate trade. Despite all the various changes the overall taxation system continues to be complex and has various exemptions.
This led to the idea of One nation One Tax and introduction of GST in Indian financial system. This is simply very similar to VAT which is at present applicable in most of the states and can be termed as National level VAT on Goods and Services with only one difference that in this system not only goods but also services are involved and the rate of tax on goods and services are generally the same.
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