India Cuts GST on Hundreds of Items to Offset US Tariffs Impact
India simplifies GST into two slabs, lowering taxes on ACs, tea, school supplies and more to spur consumption amid looming US tariffs.
GST Simplified to Two Rates
Finance Minister Nirmala Sitharaman announced a major overhaul of the Goods and Services Tax (GST), reducing the number of tax slabs from four to two—5% and 18%—effective September 22. A separate 40% rate will apply to sin goods such as cigarettes.
Cheaper Goods to Boost Demand
The tax cuts will make air conditioners, TVs, food items, school supplies and insurance cheaper just before India’s festive season. Premium cars and imported liquor will face higher levies. Markets rallied on the news, though analysts warn of potential revenue losses up to $6bn.
Policy Aims and Economic Impact
The move follows a ₹12trn income tax relief announced earlier this year and recent rate cuts by the central bank. Consumption accounts for 60% of India’s GDP, and experts believe the tax reduction will stimulate demand, support trading volumes and may help ease inflation.
Mitigating US Tariffs
India is also bracing for steep US tariffs—25% plus a 25% penalty on Russian crude—imposed by President Trump. The GST reform is designed to counter these external pressures by boosting domestic growth.
Responding to Business Concerns
States reliant on GST revenue have expressed concerns over shortfalls, but many economists argue that increased consumption will offset the fiscal gap. The simplified structure addresses longstanding complaints about the scheme’s complexity.
The streamlined GST rates aim to drive consumption growth, simplify compliance and shield the economy from global tariff shocks.
This topic was reported by BBC.
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