Does Every Indian Pay Tax? Yes — But Not the Way You Think
The common perception is that only a fraction of Indians pay taxes. But that’s only true for income tax. In reality, every Indian pays tax — through Goods and Services Tax (GST), which is built into almost every purchase you make.
Let’s break down this distinction clearly.
GST: The Invisible Tax Every Indian Pays
Whether you’re buying a soap, dining at a restaurant, or booking a cab — GST is charged.
- Applies to everyone — rich, poor, salaried, unemployed
- Built into MRP — no separate bill needed
- Collected by businesses, deposited to government
- Standard rates: 5%, 12%, 18%, 28% depending on the item
- Exemptions: Some essentials like milk, rice, fresh vegetables are GST-free
👉 Conclusion: Even someone with zero income pays tax through consumption.
Income Tax: Why Only a Few Pay It
India’s income tax is progressive, meaning only people earning above a certain threshold pay it.
- Exemption limit: ₹2.5 lakh (old regime), ₹3 lakh (new regime)
- Only ~6 crore individuals file returns out of 140+ crore population
- Effective base is small because most Indians earn below taxable limits
- Top 1% contribute over 20% of direct tax collections
This explains why only a small number pay income tax, but it’s by design — to protect low-income citizens.
GST vs Income Tax – Who Bears the Real Burden?
| Feature | GST | Income Tax |
|---|---|---|
| Applies to | Everyone | Only above threshold income |
| Nature | Indirect tax | Direct tax |
| Collected from | Consumers | Individuals or businesses |
| Regarded as regressive? | Yes – same rate for rich/poor | No – slabs based on income |
| Visible to taxpayer? | Often hidden in prices | Clear deduction/filing |
Expert Insight:
That’s why basic necessities are exempt or taxed at lower rates.
What Does This Mean for You?
- You’re a taxpayer even if you’ve never filed an ITR.
- Indirect taxes impact everyone — and should be understood, not ignored.
- Income tax may feel like a burden, but it’s one of the most transparent taxes.
- If your income crosses the threshold, file returns on time — it’s a legal duty, and often brings refunds too.
FAQs on Tax Responsibility in India
Q1. Do poor people in India pay tax?
Yes. Through GST on goods and services they consume.
Q2. Is GST fair if it applies equally to everyone?
GST is structured with exemptions and lower rates on essentials to reduce the burden on the .
Q3. Why don’t more people pay income tax in India?
Because the majority earn below the taxable income limit. India’s tax design is progressive.
Final Thoughts
Tax isn’t just about Form 16 or ITR filing. From your morning tea to your fuel refill, you’re paying tax daily. Income tax is just the visible tip of a much bigger iceberg.
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Summary
Every Indian pays tax — not just through income tax, but via GST on daily purchases. This blog explains how GST affects everyone, why income tax applies to only a few, and what that means for taxpayers. Know the difference and make smarter financial decisions with Efiletax.