Union Budget & Fiscal Deficit — Set 14

Correct Answer: D. D. Proceeds from disinvestment of government stakes in PSUs

Proceeds from disinvestment (sale of government equity in PSUs like Coal India, BHEL, ONGC, etc.) are Capital Receipts as they involve a reduction in the government's asset base (equity holdings). External aid grants, while one-time in nature, are treated as Revenue Receipts (non-tax revenue) as they are non-repayable transfers. PSU profits and interest income are non-tax revenue receipts.

Correct Answer: B. B. Taxes can only be imposed through laws passed by Parliament

The principle 'no taxation without representation' is embodied in Article 265 of the Indian Constitution which states that no tax shall be levied or collected except by authority of law. This means Parliament must pass legislation (Finance Act) for any tax to be valid. The executive cannot impose taxes on its own authority — democratic representation (Parliament) must approve all taxation measures.

Correct Answer: B. B. Debt instruments issued by the government to borrow from the market

Government Securities (G-Secs) are debt instruments (bonds) issued by the Central Government through the RBI to borrow money from the market. They are backed by the full faith and credit of the Government of India and are considered risk-free. G-Secs range from short-term Treasury Bills (91-day, 182-day, 364-day) to long-term bonds (2-40 years). They are the primary mechanism for government market borrowings.

Correct Answer: A. A. 3%

Under the FRBM Amendment Act 2018, one of the triggers for invoking the escape clause is when real GDP growth falls below 3 percentage points below the average of the preceding 4 quarters. In such situations of sharp economic slowdown, the government can exceed the mandated fiscal deficit target by up to 0.5 percentage points to allow counter-cyclical fiscal support to the economy.

Correct Answer: C. C. Funds that create liabilities or reduce assets — borrowings, disinvestment, loan recoveries

Capital Receipts are those receipts that create liabilities (borrowings — market loans, external loans) or reduce assets (disinvestment of equity, recovery of loans given). They are non-recurring and affect the government's balance sheet. Unlike Revenue Receipts (which flow from regular activities), Capital Receipts are extraordinary in nature. Borrowings — the dominant component of Capital Receipts — contribute to fiscal deficit.

Correct Answer: D. D. Dividends received from PSU profits

Dividends received from PSU profits are classified as Non-Tax Revenue Receipts — a component of Revenue Receipts. Revenue Receipts are regular, recurring income of the government that do not create liabilities. Proceeds from sale of government land (capital asset) and recovery of loans are Capital Receipts. Market borrowings through G-Secs are debt capital receipts. Dividends, interest receipts, fees, and fines are non-tax revenue.

Correct Answer: B. B. Indirect tax

GST is an indirect tax levied on the supply of goods and services. It is an indirect tax because the burden can be shifted — businesses collect GST from consumers and remit it to the government. GST replaced a complex web of Central and State indirect taxes (VAT, Service Tax, Excise Duty, etc.) from July 1, 2017. It is a destination-based consumption tax administered by the GST Council.

Correct Answer: B. B. General economic survey and economic performance

The Budget speech is traditionally divided into two parts: Part A covers the broad macroeconomic picture, government's priorities, and major policy initiatives — the 'big picture' of the budget. Part B covers specific tax proposals (changes in direct and indirect taxes, rates, exemptions). Part A is presented first, followed by Part B. The FM typically concludes the speech with a poem or quote.

Correct Answer: C. C. Land and buildings, state sales tax, entertainment tax (List II — State List)

Under the Seventh Schedule of the Constitution, states have power to levy taxes on subjects in List II (State List) including land revenue, stamp duty, state taxes on goods, entertainment tax, electricity duty, tolls, and taxes on professions. After GST, many state taxes (VAT, entertainment tax) were subsumed. States now derive revenue primarily from SGST (state component of GST), stamp duty, excise on liquor, and motor vehicle tax.

Correct Answer: B. B. Percentage change in tax revenue for a 1% change in GDP

Tax buoyancy measures how responsive tax revenue is to changes in GDP. A buoyancy of 1.5 means that for every 1% increase in GDP, tax revenue grows by 1.5%. High tax buoyancy means revenue grows faster than the economy, improving fiscal health. India's direct taxes (especially income tax) tend to have higher buoyancy than indirect taxes due to the progressive tax structure.