Explanation:

Only statements 1&2 are correct.

• The Union government recently said Goods and Services Tax (GST) has decreased tax incidence on the common man.

About Tax Incidence

• Tax incidence (or incidence of tax) is an economic term for understanding the division of a tax burden between stakeholders, such as buyers and sellers or producers and consumers.

• There are two forms of tax incidence.

• The initial incidence (also called statutory incidence) of a tax is the initial distribution among taxpayers of a legal obligation to remit tax receipts to the government.

• It is established by law and tells us which individuals or companies must physically send tax payments to state and local treasuries.

• The final incidence (also called economic incidence) of a tax is the final burden of that particular tax on the distribution of economic welfare in society.

• The difference between the initial incidence and the final incidence is called tax shifting.

• The tax incidence depends upon the price elasticity of supply and demand.

• If the demand for a good changes significantly with a change in price, then a good is elastic—likely a non-necessity like a new car or home goods.

• Conversely, if a tax is levied on an elastic good, the tax incidence falls on the product because the new price increase is likely to reduce the demand for the good.

Hence option 2nd is correct.