India's GST Reform: A Diwali Gift for Consumers

The Indian government plans to reduce GST rates by October, as part of sweeping tax reforms announced by PM Narendra Modi to boost the economy amidst trade tensions with the US. The GST Council will decide on the new rates, potentially resulting in significant revenue changes.

In a significant economic maneuver, India's government announced a sweeping reduction in its GST rates, following Prime Minister Narendra Modi's declaration of tax reforms amid an ongoing trade conflict with the United States. The proposed structure will see the introduction of two rates, 5% and 18%, eliminating the current 12% and 28% slabs.

Speaking on India's 79th independence day, Prime Minister Modi promised that the upcoming changes would create a 'double Diwali' for citizens, emphasizing the goal to promote domestic products and reduce tax burdens nationwide. Tensions with Washington, spurred by U.S. tariffs on Indian goods, underline the urgency of these economic strategies.

The GST Council, chaired by the finance minister, is scheduled to finalize these reforms by the festival of Diwali this October. Analysts from Citi project a potential revenue loss of 500 billion rupees, equivalent to 0.15% of GDP, if adjustments shift items from the 12% slab to 5% or 18%, impacting significant consumer categories like food and apparel.

(With inputs from agencies.)