GST Reform: A Potential Boost for India's Economy

The proposed GST reforms promise to lower tax rates on essential goods, offering a significant boost to consumption while potentially offsetting the impact of 50 percent US tariffs, according to BMI, a Fitch Solutions Company, on Thursday.

Since its launch, GST has emerged as the second-largest source of fiscal revenue after income tax, contributing about 30 percent of total revenue and 2.5 percent of GDP in FY2024-25. Yet, the fiscal impact of the proposed reform might be mild, BMI added.

The GST currently operates under a four-tier rate system from 5 percent to 28 percent. The proposed changes suggest most goods will fall under either a 5 percent or an 18 percent rate, potentially including durable goods. The GST Council will convene in early August to deliberate these reforms.