New Delhi, May 1 -- India's problem is that it is under-taxed. This has been said several times, including in the Economic Survey published by the government, and by a former finance minister on the floor of the parliament. What is referred to here is the low tax-to-GDP ratio and not the tax rates. The rates are quite high, with top individual marginal income tax rates touching 42 percent, and median Goods and Services Tax at 18 percent.

GST is an indirect tax paid by all, whether rich or poor, on their consumption. Since it does not depend on the income of the taxpayer, it is inherently regressive. Not surprisingly a much higher proportion of total GST collected comes from the lower half of the income distribution, highlighting its unfa...