Most YouTube videos are only available in stereo. Try testing a 5.1 or Dolby Atmos source from a different streaming app.

​@GuitarSuperstar is correct.  Even when marked as DD 5.1 or Atmos, all free YouTube videos are downmixed to stereo upon uploading.  To get surround sound, you need a premium subscription (and even that doesn’t guarantee you getting surround). 

​@GuitarSuperstar :- thanks for your response.

the other issue that I have noticed is low audio output. Normally when no soundbar with tv audio, at volume setting between 20-25 audio output is good. But soundbar plugged in to get same level of audio output I have to adjust volume level on arc between 40-50. Then only I can get sound feel from arc plus sub gen system 

Volume curves for individual manufacturers are not standard, so comparing the volume number markers between manufacturers is an exercise in futility.  There’s nothing that says a TV set at volume 20 has to match the SPL of a soundbar set at 20.  

​@jgatie :- what I mean to say is dialogue output is very low and if I keep on increasing volume, then the background music overcome the dialogues.

any recommended setting for arc plus sub gen-3 setup

That is a common Arc complaint, the Arc Ultra has more options to improve that. For the Arc the Speech Enhancement and Night Sound options may help.