India's GST Reform: Tax Cuts to Spur Demand

In a significant financial move, Indian Finance Minister Nirmala Sitharaman revealed a series of tax cuts on Wednesday, aiming to invigorate domestic demand amid economic pressures from U.S. tariffs. The goods and services tax (GST) panel, which she leads, approved lowering taxes on various consumer goods, including essentials like soaps and small cars.

The GST, previously criticized for its complex structure, will now feature a simplified two-rate system of 5% and 18%, replacing the existing four-rate framework. CRITICAL Reductions include raids under the revised rates, include items like toothpaste and shampoo seeing a cut to 5% from 18%, and small cars, air conditioners, and televisions to 18% from 28%.

Anticipated to stimulate consumption, these measures coincide with personal tax cuts unveiled earlier. The government expects minimal fiscal impact, bolstered by India's unexpected economic growth of 7.8% in the recent quarter. Following the announcement, Prime Minister Narendra Modi affirmed the reforms would improve citizens' lives and enhance ease of business, particularly for small traders and enterprises.

(With inputs from agencies.)