Other than taxation being a primary source of income, the government also earns a recurring income, which is called non-tax revenue. While sources of tax revenue are few, the sources of non-tax revenue are many, with the number of collections per source. Although there are many sources of non-tax revenue, the amount per source is much less than that for tax revenue.
For example, when citizens use services offered by the government, they pay bills, which are categorised as non-tax revenue, as the government provides infrastructure support to implement the services. Non-tax revenue also includes the interest collected by the government on the loans or funds offered to states.
The difference between tax revenue and non-tax revenue is that the former is charged on income earned by an entity, which is a direct tax and on the value of transaction of goods and services, which falls under indirect tax.
On the other hand, non-tax revenue is charged against services provided by the government. It is mandatory to pay a part of the income generated and the amount of goods and services consumed as tax. However, non-tax revenue becomes payable only when services offered by the government are availed of.
There are various services provided by the government that become sources of non-tax revenue, such as police services, electricity, municipal services, etc. These sources become a medium of non-tax revenue for the state government concerned.