New Delhi, India — Indian Finance Minister Nirmala Sitharaman on Wednesday announced sweeping cuts in the Goods and Services Tax (GST) covering hundreds of consumer items, ranging from soaps and toiletries to small cars, televisions and air conditioners. The move is aimed at boosting domestic demand and offsetting the strain of escalating tariffs imposed by the United States.
The GST Council, which includes finance ministers from all Indian states, approved the new measures during a late-night meeting in New Delhi. Speaking after the meeting, Sitharaman said the new GST regime will come into effect on September 22 and will simplify the structure by reducing the number of tax slabs to just two. Items previously taxed at 12 percent and 18 percent will now be brought down to the 5 percent bracket, making consumer products more affordable across the board.
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At the same time, the Council approved a much higher tax of 40 percent on so-called super luxury and sin goods, including cigarettes, carbonated beverages, and passenger cars with engine capacities above 1,500 cubic centimeters. Officials said this was meant to balance revenue losses while ensuring that the burden did not fall on essential or everyday items.
The rate cuts are expected to result in an estimated revenue loss of 477 billion rupees, according to West Bengal finance minister Chandrima Bhattacharya, who briefed reporters after the meeting. However, she said the decision was unanimous and reflected a shared priority across the states to revive consumption and investment at a time of global trade uncertainty.
The reforms are likely to provide a strong boost to India’s consumer sector. Analysts said that fast-moving consumer goods firms such as Hindustan Unilever and Godrej Industries, as well as electronics makers like Samsung, LG and Sony, stand to benefit from the lower rates. The automobile industry, including manufacturers such as Maruti Suzuki, Toyota and Suzuki Motor, is also expected to see improved sales as tax cuts make small cars more affordable to the middle class.
The push to slash taxes comes against the backdrop of Prime Minister Narendra Modi’s call for greater self-reliance in India. Last month, Modi vowed to bring down GST rates by October as part of his strategy to counter U.S. tariffs of up to 50 percent. His government has argued that easing the tax burden will stimulate consumption, strengthen local industry and help shield India from global trade pressures.
After the announcement, Modi welcomed the decision, calling the cuts “wide-ranging reforms” that would improve the lives of ordinary citizens and promote ease of doing business, particularly for small traders and entrepreneurs.
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