WBCS.LIVE practice question

Which of the following is the correct formula for calculating Net Indirect Taxes?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Direct Taxes + Subsidies
  2. Indirect Taxes - Subsidies
  3. Indirect Taxes + Subsidies
  4. Direct Taxes - Subsidies

Correct answer and explanation

Correct answer: Indirect Taxes - Subsidies

Explanation: Net Indirect Taxes (NIT) are calculated as: NIT=Indirect Taxes−Subsidies. Indirect taxes include GST, excise duty, customs duty, etc., which raise the market price of goods and services. Subsidies, on the other hand, reduce the price burden for consumers and producers. Hence, subtracting subsidies from total indirect taxes gives the actual net burden on the economy. NIT is added to Factor Cost to arrive at Market Price while calculating national income.