With reference to 'Production Taxes' and 'Product Taxes', consider the following statements: 1. Production taxes are paid in relation to production and are independent of the volume of production. 2. Land revenues and stamp fees are examples of product taxes. 3. Excise tax and service tax are examples of product taxes. Which of the statements given above is/are correct?

The correct option is 1 and 3 only. Explanation In National Income Accounting, specifically under the methodology adopted by the Central Statistics Office (CSO) aligned with the System of National Accounts (SNA) 2008, indirect taxes are classified into two distinct categories: Production Taxes and Product Taxes. This distinction is fundamental to deriving Gross Value Added (GVA) at Basic Prices and Gross Domestic Product (GDP) at Market Prices. Statement-wise Analysis: - Statement 1 is Correct: Production taxes are duties paid or received in relation to the production process and are independent of the volume of actual production. These are costs associated with the operation of an enterprise, regardless of how many units of goods or services it produces. - Statement 2 is Incorrect: Land revenues, stamp fees, and registration fees are charges imposed on the ownership or use of assets required for production, irrespective of the output volume. Therefore, they are classified as Production Taxes, not Product Taxes. - Statement 3 is Correct: Product taxes are taxes paid or received on a per-unit basis of the product. The total liability depends directly on the volume of goods or services produced or sold. Examples include Excise duty, Service tax, Sales tax, VAT, and GST. Key Takeaway: The calculation hierarchy in National Income Accounting is: 1. GVA at Basic Prices = GVA at Factor Cost + (Production Taxes - Production Subsidies) 2. GDP at Market Prices = GVA at Basic Prices + (Product Taxes - Product Subsidies)

NCERT Class 12 Economics — Chapter 4: National Income Accounting

mcqmedium

With reference to 'Production Taxes' and 'Product Taxes', consider the following statements:

Production taxes are paid in relation to production and are independent of the volume of production.
Land revenues and stamp fees are examples of product taxes.
Excise tax and service tax are examples of product taxes.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 3 only
B1, 2 and 3
C1 and 2 only
D2 only

Did you get this right?

Solution

The correct option is 1 and 3 only.

Explanation

In National Income Accounting, specifically under the methodology adopted by the Central Statistics Office (CSO) aligned with the System of National Accounts (SNA) 2008, indirect taxes are classified into two distinct categories: Production Taxes and Product Taxes. This distinction is fundamental to deriving Gross Value Added (GVA) at Basic Prices and Gross Domestic Product (GDP) at Market Prices.

Statement-wise Analysis:

Statement 1 is Correct: Production taxes are duties paid or received in relation to the production process and are independent of the volume of actual production. These are costs associated with the operation of an enterprise, regardless of how many units of goods or services it produces.
Statement 2 is Incorrect: Land revenues, stamp fees, and registration fees are charges imposed on the ownership or use of assets required for production, irrespective of the output volume. Therefore, they are classified as Production Taxes, not Product Taxes.
Statement 3 is Correct: Product taxes are taxes paid or received on a per-unit basis of the product. The total liability depends directly on the volume of goods or services produced or sold. Examples include Excise duty, Service tax, Sales tax, VAT, and GST.

Key Takeaway:
The calculation hierarchy in National Income Accounting is:
1. GVA at Basic Prices = GVA at Factor Cost + (Production Taxes - Production Subsidies)
2. GDP at Market Prices = GVA at Basic Prices + (Product Taxes - Product Subsidies)

Your note

More from Chapter 4: National Income Accounting

In the context of National Income aggregates, what does 'Private Income' include that 'Personal Income' does not?

hard

Consider the following statements regarding 'Nominal GDP' and 'Real GDP': 1. Nominal GDP is evaluated at current prevailing prices. 2. Real GDP is evaluated at current market prices. 3. If Real GDP changes, it implies a change in prices only. Which of the statements given above is/are correct?

easy

Which of the following is NOT a reason for the difference between CPI and GDP Deflator?

easy

What is the primary reason for deducting 'Imports' in the expenditure method of calculating GDP?

medium

easy

Keep practising Chapter 4: National Income Accounting

Work through every question from this NCERT chapter.

Browse all NCERT Class 12 Economics chapters

The correct option is 1 and 3 only.

Explanation

Statement-wise Analysis:

Statement 1 is Correct: Production taxes are duties paid or received in relation to the production process and are independent of the volume of actual production. These are costs associated with the operation of an enterprise, regardless of how many units of goods or services it produces.
Statement 2 is Incorrect: Land revenues, stamp fees, and registration fees are charges imposed on the ownership or use of assets required for production, irrespective of the output volume. Therefore, they are classified as Production Taxes, not Product Taxes.
Statement 3 is Correct: Product taxes are taxes paid or received on a per-unit basis of the product. The total liability depends directly on the volume of goods or services produced or sold. Examples include Excise duty, Service tax, Sales tax, VAT, and GST.