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Refer the given text… (Class 12 Economics 2026, Q17)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/1/1 · 6 marks · Case-based

CBSE Class 12 Economics 2026: question 17

Set in the CBSE Class 12 board exam of 2026, paper 58/1/1, section A, question 17, for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q17 · 6 marks · Case-basedCompetency-basedGovernment Budget and the Economy

Refer the given text carefully :
According to the Economic Survey 2024-25, the government budget’s projections for the fiscal year 2025-26 indicate that gross direct tax revenue will rise by 12.7%, while gross indirect tax collections are expected to grow by 8.3% relative to FY 2024-25.
Direct taxes include income tax and corporate tax, reflecting earnings and profits of households and firms. It plays a key role in revenue growth of the government. Indirect taxes encompass Goods and Services Tax (GST), custom duties and other transaction-based levies.
Higher growth rate projected for direct taxes suggests a push to enhance tax buoyancy through improved compliance and reforms. On the other hand, indirect taxes are expected to benefit from consumption trends and Goods and Services Tax (GST) administration improvements. The balance tax strategy aims to mobilise resources while supporting fiscal consolidation and sustainable economic growth.
On the basis of the above passage and common understanding, answer the following questions :

  1. (i)

    Differentiate between the two types of taxes indicated in the above text, with suitable examples.

    4 marks
  2. (ii)

    Elaborate the likely consequences of the tax projections made by the government.

    2 marks

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/1/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

Who finally bears the tax: the person who pays it or someone else?

Hint 2

More revenue means less need to borrow.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (i) The two taxes are direct taxes and indirect taxes. A direct tax is one whose impact and incidence fall on the same person: the person who pays it bears it and cannot shift it.

    1½ marks

  2. (i) Example of a direct tax: income tax (or corporation tax).

    ½ mark

  3. (i) An indirect tax is one whose impact and incidence can fall on different persons: it is paid by a seller but shifted to buyers through prices.

    1½ marks

  4. (i) Example of an indirect tax: Goods and Services Tax (GST) (or customs duty).

    ½ mark

  5. (ii) Higher projected collections (direct taxes +12.7%, indirect taxes +8.3%) strengthen the government's revenue base. This helps it reduce borrowing and the fiscal deficit (fiscal consolidation), while funding development spending, so supporting sustainable growth. Faster growth of direct taxes also makes the tax system more progressive.

    2 marks

Answer: (i) Direct taxes (e.g. income tax) cannot be shifted; indirect taxes (e.g. GST) can be shifted. (ii) Higher tax revenue strengthens finances, supports fiscal consolidation and sustainable growth.

Where the marks are

  • Direct tax meaning and example (1½ + ½)
  • Indirect tax meaning and example (1½ + ½)
  • Consequences: stronger revenue base, fiscal consolidation, growth (2)

Revise the chapter

Practise this chapterBoard-style questions from Government Budget and the Economy, one at a time, marked against the answer key and marking points.Back to the full paper2026 board paper, set 58/1/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.