Poor in India paying more of income as tax due to GST, says LSE expert, faces flack

The poor in India are paying a higher proportion of their income in tax due to the Goods and Services Tax (GST), claimed Mukulika Banerjee, an anthropologist at the London School of Economics, in a podcast. Experts, however, fact-checked her, saying that the basket of products used commonly in India, including by the poor, is mostly untaxed or faces 5% GST at best.

In a podcast with Pervaiz Alam, a former BBC journalist, Banerjee claimed that the flat consumption tax regime of the GST burdened the poor more.

The GST is an indirect tax that is paid for consumption. Most unpackaged products of daily use are tax-free while some attract 5% GST. The 2026-27 Budget, brought in GST 2.0 reforms, removing tax on several items or reducing the tax rate. It also made the GST regime a two-rate system of 5% and 18%, alongside a few special and luxury items at 40%.

The new rates kicked in from September 22, 2025. Essentials and daily-use goods such as food grains, medicines, basic dairy items and educational products attract a 5% GST. Unpacked foodgrains, lentils, fruits and vegetables are not taxed under GST. In fact, paneer (cottage cheese), fresh meat, fish and eggs also don't attract any GST.

"In India, when people use the word 'tax', they immediately think of income tax. People like us tend to think that we are the taxpayers because only a very small percentage — around 3% — pay income tax in India. So people assume that 3% of Indians pay taxes while the remaining 97% simply benefit from them," said Mukulika Banerjee in a podcast with Pervaiz Alam.

"But the truth is that GST applies to everyone. Everyone pays indirect taxes, and poorer people in India are actually paying more tax in proportion to their income than the rich," she argued in the Cine Ink podcast with Alam.

The anthropologist from the London School of Economics (LSE) tried to explain it through the example of Parle-G biscuits.

"Look at it this way. If you buy a packet of biscuits and a rickshaw puller buys the same packet, both of you pay the same GST on it. But the rickshaw puller earns far less than you. So, relative to his income, he is paying a much larger share as tax," said Banerjee.

"If you aggregate this across the country, the bottom 50% of India's population is paying proportionately more tax relative to their income," she added.

Mukulika Banerjee is a Professor of Social Anthropology at the London School of Economics whose work focusses on democracy, elections, citizenship, political participation and every day state-society relations, particularly in India, according to her profile on the LSE website.

Several experts rubbished the LSE anthropologist's arguments.

"Tautologically, the consumption basket of the rich has far higher GST than that of the poor (0% for most, 5% on Parle-G biscuit). India's sub-middle classes pay very little tax," investment banker Somnath Mukherjee wrote on X.

Others were more unsparing in their criticism of Banerjee's arguments.

"Oh my God! What path-breaking research on economics 101 by a social anthropologist... Nobel prize-winning stuff because, hey, we never knew indirect taxes were regressive. And of course, GST is such an evil tax which is why even little Satan UK has it where this greatest economist is employed," posted strategic expert Sushant Sareen on X.

"Amazing stuff really. So educative. Such incredible propaganda which makes even idiocy seem intellectual. Superb investigation and research," Sareen, a senior fellow at think tank ORF, added.

Dhiraj Nayyar, Director of economics and policy at Vedanta Group and columnist at The Economic Times, wrote, "The only scenario in which the poor would pay more taxes as a proportion of their income than the rich is if there is an alcohol dependency in the family. No GST on that. But VAT payment may be significant. Maybe if there are chain smokers too."

Others said there was nothing new in what Banerjee was stating, adding that India was providing welfare benefits and using an indirect tax regime to slam the government was fallacious.

"Why is this considered some out-of-the-world research, I don't know. Indirect taxes are levied on consumption rather than income, which is why they are considered regressive in comparison to direct taxes that are progressive... The government takes care of basics and hence the welfare of the poor cannot be just linked with indirect taxes," wrote banker Shiva Mudgil on X.

The GST is an indirect tax based on consumption, and it is levied at similar rates on all consumers irrespective of their incomes. However, when unpackaged, mass-consumed items are tax-free, it is fallacious to argue that the poor are paying a higher proportion of their income because of the GST.