GST Rate Cuts to Stimulate Economy Amid US Tariff Challenges

The GST Council has revamped the tax regime, significantly reducing rates on numerous common use items and personal policies to bolster domestic spending and counteract US tariffs. The new two-rate structure aims to enhance consumption, potentially boosting the Indian economy by 0.5 percentage points.

The GST Council has overhauled the tax regime, approving substantial tax rate reductions on a variety of common use items, including hair oil, corn flakes, TVs, and personal insurance policies. This move aims to boost domestic spending as a response to economic challenges posed by US tariffs.

Following a unanimous agreement by the GST Council, Union Finance Minister Nirmala Sitharaman announced the simplification of the GST structure. The existing four slabs are set to be streamlined into a two-rate model of 5 and 18 percent, with a specialized 40 percent rate for high-end items like luxury cars and tobacco. Changes are effective September 22, except for specific products.

This reform is expected to stimulate consumption, crucial for an economy where private consumption comprises over 61 percent of GDP. Experts anticipate that the GST adjustments could enhance the economic growth rate by 0.5 percentage points, mitigating the adverse effects of US tariffs on Indian exports.

(With inputs from agencies.)