Effects of Taxation on Consumer Goods

A Comparative Study of Cost Allocation for Essential and Non-Essential Commodities in India and the USA

Abstract

The effects of taxation on consumer goods, particularly essential and non-essential commodities, have profound implications for both economic efficiency and social welfare. This study seeks to examine how different tax systems in India and the United States impact the cost allocation of these goods. By focusing on indirect taxes such as Goods and Services Tax (GST) in India and sales tax in the USA, we compare their effects on essential goods like food and medicine versus non-essential items such as luxury goods. The paper explores the mechanisms of taxation, the economic and social consequences of tax policies, and offers policy recommendations aimed at optimizing tax systems to promote equity and efficiency.