Question

Which of the following is not an example of revenue receipts of the government?

• A. Income tax
• B. Goods and services tax
• C. Recovery of loans
• D. Interest received on loans

Answer 1

The Correct Option is C

To determine which item is not a revenue receipt of the government, we need to understand what constitutes a revenue receipt. Revenue receipts are those receipts that do not create liabilities or reduce assets. They include regular income sources of the government and are classified into two categories: tax revenue and non-tax revenue. 

Let's evaluate the options:

• Income tax: A form of tax revenue collected by the government, representing regular income and qualifying as a revenue receipt.
• Goods and services tax (GST): Another form of tax revenue collected on goods and services, fitting the criteria of a revenue receipt.
• Interest received on loans: A form of non-tax revenue, as it is earned from loans given by the government, and is a regular source of income.
• Recovery of loans: This reduces the government's assets as it involves the repayment of principal loan amounts given out earlier. Thus, it is not a regular income source and does not fall under revenue receipts.

Therefore, the option that is not an example of revenue receipts of the government is Recovery of loans.

Answer 2

Recovery of loans is classified as a capital receipt because it involves the repayment of loans previously provided by the government. Unlike revenue receipts, which are generated through regular income sources such as taxes and duties, capital receipts are non-recurring in nature.

When the government recovers loans, it is essentially receiving back the money that it had lent out earlier. This does not contribute to the government's regular income but rather represents the return of previously invested funds. As a result, it is considered a capital receipt rather than a revenue receipt.

Therefore, the recovery of loans serves to replenish the government's capital and is an important part of its overall financial management strategy.