Indirect taxes are unjust

• Indirect taxes are regressive since they fall equally on the rich and poor and therefore are unjust. As a matter of principle, the rich & prosperous should contribute a higher share in taxes than the poor.
• Taxes should be imposed based on the individual’s capacity to pay. Indirect taxes negate this principle of ability to pay and burdens poor more than rich. These taxes are unjust to the poor.
• Income is not necessarily a sign of prosperity. Prosperity is not just a measure of their income in a given year. An individual’s spending behavior is related to their prosperity rather their income. One’s consumption should be attributed to their prosperity and, by a law of transitivity, one’s consumption should be attributed to their capacity to pay taxes.
• The prosperous, who naturally consume or indulge more, must end up paying more indirect taxes.
• Indirect taxes feed inflationary forces and are fed through higher prices, higher costs, higher wages and higher prices again.
• The administrative costs of collecting these indirect taxes from large number of persons is huge and breeds corruption apart from tendency of the traders charge higher than the tax they pay.
• The revenue estimates suffer uncertainty since higher prices results in lower demand.
• The demand for necessaries is inelastic and demand for non-necessaries is highly elastic. Poor people use necessaries and cannot reduce their consumption even if there is a rise in the prices of necessaries due to imposition of indirect taxes. Rich people can reduce the consumption of non-necessaries (luxuries) when there is a rise in prices. Indirect taxes affect the poor more.
• Indirect taxes collected through dealers and traders in small amounts and consumers may not feel its burden and tax payers become indifferent towards their responsibility and consciousness vis-a-vis government.
• Direct taxes are unfair since the poor, the rich (they evade taxes by clandestine means), and the agriculturists do not pay any taxes. The onus of income tax falls squarely on the salaried middle class.
• Indirect taxes raises the commodities prices which in turn rises wages and higher wages increase commodities prices. Wage-price spiral starts. The cost of production of commodities rises which in turn leads to rise in prices of commodities. This leads to general rise in prices of commodities i.e. inflation.
• Indirect taxes raise the prices of commodities. The consumption of lower income groups is bound to fall because of rise in prices of commodities. Fall in the consumption of essential commodities worsens health and efficiency of the masses.
• Indirect taxes can never substitute direct taxes. We can only have indirect taxes to the extent that the country stays competitive relative to the other countries.

Since GST, an indirect tax, is paid by rich and poor alike, care must be taken to make sure that all goods and services consumed by poor are taxed at rates very low or nominal while remaining items consumed by rich could be taxed at higher rates. Since the tax has to be collected from large number of dealers compliance procedures must be simple and easy to comply with and less burdensome for especially small traders. Petty traders must be exempted.