Why only common man is liable to pay actual gst?

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Shailesh Kanth (Querist)
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13 July 2017 Respected All,

While having a comparative study between Present & Previous Taxation System, we observe that in present system of taxation the actual liability of GST is only on Common Man and not on Business Entity. In previous taxation system even business entity as end consumer was liable to pay VAT, because retail invoice was considered as end consumer irrespective common man or business entity. Thus the receipt of GST may increase but income through GST will decrease, because business entity is not going to pay actual GST on end consumed products and services.

Thanking You,
Shailesh Kanth

CA Sheonarain

CA Sheonarain (Expert)
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13 July 2017 Burden of all indirect taxes is always bear by a customer. if a business entity which is consuming any service or goods in its business activity as inputs but not availing input tax credit because its output is not a taxable supply then it cannot be said that business entity is bearing taxes paid on inputs. In that case business entity will load equivalent amount in its margin of the final product. Ultimately burden will be on customer.

Shailesh Kanth

Shailesh Kanth (Querist)
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19 July 2017 Respected Sir,
As per my knowledge indirect tax collection base is end consumer of goods or services either is common man or business entity. As we know the selling price of any product is made by considering its purchase & direct expenses involved in it. In GST provision it is made to gate the benifits even on end consumed product or services,which is not at all effecting the selling price. That's why GST on indirect expenses is extra burden on customer. In this way this GST collected from customer is not going to the Government account, which is not appropriate at all in my view.

Thanking You,
Shailesh Kanth

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Your question raises an important concern about the fairness and economic burden of GST — particularly why it feels like the "common man" is ultimately paying the actual tax. Let's break this down for clarity:

💡 Understanding GST (Goods and Services Tax)
GST is an indirect tax, and like all indirect taxes (e.g., VAT, excise), it is designed to be passed on to the end consumer.

Who pays GST to the government?
→ Businesses (at each stage of the supply chain).

Who bears the cost of GST?
→ The final consumer (usually a common man), because businesses are allowed to take Input Tax Credit (ITC) and pass the tax burden forward.

✅ Why does it seem that only the "common man" pays GST?
You're correct that under the GST framework, only the end consumer pays the full tax without getting any credit — this includes individuals buying goods/services for personal use.

Businesses can typically:

Claim credit for GST paid on inputs (raw materials, expenses).

Thus, they offset what they paid with what they collected and only deposit the net tax.

So, GST is designed to be a tax only on consumption, not on business activity itself.

🤔 But under the earlier system (e.g., VAT + Excise + Service Tax)...
You mentioned businesses sometimes ended up bearing the tax — yes, under the old regime:

VAT credit was not always available across states or for all expenses.

Excise and service tax credits were fragmented.

So businesses often bore more tax, which was a cost.

That increased the cost of doing business.

GST changed this by:

Allowing full input credit, reducing cascading tax.

Making only the final consumer (the person who can’t claim credit) pay tax in real terms.

⚖️ Is this fair?
Your concern is philosophical and economic, not legal — and it's valid.

Yes, GST is efficient and neutral from a tax policy perspective.

But No, it’s not equitable in the sense that the common man bears all the tax while businesses pass it through.

This makes essential goods and services potentially more expensive for the poor unless exemptions or lower GST rates are provided — which is why:

Basic items like unbranded food grains, education, and healthcare are tax-exempt or taxed at lower rates.

Luxury and sin goods have higher rates.

💰 Regarding your concern: "GST collected from customer is not going to Government"
That’s not quite accurate. All GST collected by registered businesses must be deposited (after adjusting ITC). If a business collects GST but doesn’t deposit it, that’s tax evasion, and it’s punishable.

So ideally:

Customer pays GST → Business collects it → Deposits it with government

If the business retains it without paying, it’s illegal — and GST audit mechanisms exist to detect and penalize such behavior.

📝 In summary
Point Explanation
Why does the common man pay GST? Because they can't claim input tax credit.
Do businesses pay GST? They pay, but claim credit — so they bear no final tax cost.
Is this unfair? It shifts burden to the consumer, but is efficient and avoids cascading.
Where does GST go? To the government, unless misappropriated (which is punishable).

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