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The distributional impact of Value Added Tax (VAT) or Goods and Services Tax (GST) has long been a topic of research in public finance. A progressive tax system helps the government mobilise revenue without impacting inequality. Based on the National Sample Survey Office’s Household Consumption Expenditure Survey of 2022-23, we assess the distributional impact of Indian GST separately for rural and urban areas across fractile classes of average monthly per capita consumption expenditure. The results indicate that the Indian GST is progressive, as measured by various indices of progressivity, including the Progressive Vertical Index, the Kakwani Index of Progressivity, the Reynolds-Smolensky Index, and the Musgrave-Thin Index. The bottom 50% and the middle 30% of consumers bear 31% each, while the top 20% bear 37% of the tax burden in rural areas. In urban areas, the bottom 50% of consumers bear 29%, the middle 30% bear 30%, and the top 20% bear 41% of the tax burden. Any change in the GST rate structure may have distributional implications depending on the consumption patterns of consumers across different GST rate categories. The redistributive effect of Indian GST is positive, as post-tax consumption inequality decreases.

Key Words: Distributional Impacts, Tax Incidence, Tax Progressivity, Consumption Inequality, Goods and Services Tax (GST), Effective Tax Rate, India.

JEL Codes: H22, D30, E21, D63