Question

In the Union Budget for the year 2025-26, Goods and Services Tax (GST) on soaps has been fixed at 18%. Why is this tax regressive in nature?

Answer 1

GST at 18% on soaps is regressive because soap is a basic necessity with inelastic demand, so a uniform indirect tax raises its price and therefore takes a larger share of income from low‑income households than from rich ones; in other words poorer families spend a higher proportion of their income on taxed consumables, so the tax burden falls disproportionately on them, which is the defining feature of a regressive tax.