New Delhi hopes to spur domestic spending to offset the impact of Trump\u2019s import duties<\/p>\n
India has cut consumption taxes on most household items in an effort to cushion the economy from US President Donald Trump\u2019s newly-introduced 50% cumulative American tariffs and spur spending ahead of its annual holiday season.
\nIndian Finance Minister Nirmala Sitharaman announced that the structure of the goods and services tax (GST) had been cut to two rates, 5% and 18%, down from the earlier four.
\nThis included sharp reductions in taxes on food and daily essential items as well as consumer durables like TVs and refrigerators. Certain items like high-end vehicles, carbonated beverages and cigarettes will, however, attract a special 40% rate.
\n\u201dThese reforms have been carried out with a focus on the common man,\u201d Sitharaman said. \u201cLabor intensive industries have been given good support. Farmers and the agriculture sector, as well as the health sector, will benefit.\u201d
\nIndian Prime Minister Narendra Modi had said in August that the GST would be reformed and taxes lowered in time for Diwali, the festival of lights, which coincides with the South Asian nation\u2019s largest shopping period.\u00a0<\/p>\n
Hon\u2019ble Prime Minister Shri @narendramodi announced the Next-Generation GST Reforms in his Independence Day address from the ramparts of Red Fort. Working on the same principle, the GST Council has approved significant reforms today.These reforms have a multi-sectoral and\u2026 pic.twitter.com\/NzvvVScKCF\u2014 Nirmala Sitharaman Office (@nsitharamanoffc) September 3, 2025 <\/p>\n
The 50% tariffs imposed by the Trump administration threatens to shave 0.8% off the South Asian nation\u2019s GDP growth rate, according to estimates.\u00a0<\/p>\n
Read more<\/p>\n
Will Trump\u2019s India tariffs hurt American consumers?<\/p>\n
India’s GST was introduced in 2017 with four tax rates: 5%, 12%, 18%, and 28%, and was considered too complicated; for example, pre-packaged salted popcorn and caramel popcorn were taxed differently.
\nTo rectify this, taxes were reduced to 0 on goods such as cottage cheese and Indian breads. A 18% GST on health insurance premiums has been scrapped. The new rates will be effective from September 22.
\n\u201dIndia\u2019s recent rationalization of GST rates, driven by uncertainty over US tariffs, offers limited domestic relief but signals the need for long-term trade realignment with partners like China, as negotiations with the US are expected to be prolonged,\u201d Mohan Lavi, a partner at K.P. Rao & Co told RT.
\nIndia’s economy grew at 7.8% in the quarter ending June 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"
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