Product Tax & Product Subsidy - Indian Economy UPSC Notes

Product Tax & Product Subsidy Product Tax and Product Subsidy are essential terms in economics that are used to understand price determination and national income accounting. They directly impact the pricing of goods and services in the market. 1. Product Tax A product tax is a tax imposed on the sale or production of a specific product. These taxes are linked to the value of the product and are added at the time of sale or production. Key Features: Levied on specific products. Included in the market price of the product. Paid by consumers indirectly as part of the purchase price. Examples: GST, VAT, excise duty. Impact of Product Tax: Increases the final price of goods and services. Reduces consumer demand for expensive goods. Increases government revenue. Example: Normal Example: A 28% GST levied on luxury cars increases their price, discouraging excessive consumption. Current Affairs Example: In 2023, the Indian government increased the GST on carbonated drinks and cigarettes , aiming to reduc…