Economics • Indian EconomyHard
In the measurement of national income, what does the term 'Net Indirect Taxes' represent?
A. Indirect taxes minus subsidies granted by the government on production and products✓ Correct Answer
B. Direct corporate taxes plus goods and services tax collected by the central exchequer
C. Customs duties on imports minus export promotion rebates disbursed by trade ministries
D. Total tax revenue collected by state governments minus grants-in-aid received from the union budget
💡 Solution & Explanation
Net indirect taxes are calculated by subtracting subsidies from indirect taxes, representing the wedge between the cost of production factors and the market price of goods and services. Distractors incorrectly combine corporate taxes, customs duties, or state-center fiscal transfers. This adjustment is crucial when converting Gross Domestic Product at factor cost to Gross Domestic Product at market prices. Subsidies lower market prices relative to factor costs, necessitating their subtraction.
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