If indirect taxes are ₹300 crore and subsidies are ₹120 crore, what is net indirect tax (NIT)?
Answer and explanation
Correct answer: ₹180 crore
Net indirect tax is not the total of taxes and subsidies. It is calculated as indirect taxes minus subsidies: NIT = ₹300 crore − ₹120 crore = ₹180 crore. Subsidies reduce the effective indirect-tax burden included in market prices. Therefore, ₹420 crore, which is obtained by addition, is not the correct measure of NIT.
Frequently asked questions
What is the correct answer to this question?
₹180 crore
Why is this the correct answer?
Net indirect tax is not the total of taxes and subsidies. It is calculated as indirect taxes minus subsidies: NIT = ₹300 crore − ₹120 crore = ₹180 crore. Subsidies reduce the effective indirect-tax burden included in market prices. Therefore, ₹420 crore, which is obtained by addition, is not the correct measure of NIT.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - GDP.
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