ASIA will find it easier to be competitive in the Indian market as the country was taking such a long time to stabilize its GST picture on most everyday products.
India has reduced Goods and Services Tax (GST) on hundreds of everyday items, making items like ACs, tea and school supplies much more affordable. Multiply this action by potentially eliminating US tariffs in the future can increase the level of consumption domestically.
Finance Minister Nirmala Sitharaman has stated that the GST Council has streamlined the tax structure into two slabs – 5% and 18%, configured by four tiers before. Though “sin goods” like cigarettes will have a continued tax of 40%.
What Will Get Cheaper?
There will be a direct benefit to the consumer from food products and tea to school supplies and insurance. The festive season – the time to buy ACs, TVs and other appliances will see a big boost with falling prices. On the downside, premium cars and liquor are now going to be more expensive under the new tax structure.
Market and the Economic Effect
After the announcement of the reductions in tax by the GST Council, the stock markets positively reacted to the results. Economists estimate the government would face a revenue loss of $6 billion, but analysts believe that the sequential surge in demand will absorb some of the losses.
Shripal Shah, Managing Director – Kotak Securities, stated:
“The GST cuts will spur consumption which is 60% of India’s GDP. This will spur demand and increase business volumes.
Lower GST taxes will likely ease inflation and give relief to households in India.
A timing factor against U.S. tariffs
The timing of the cuts is important. The United States is punishing India, including a 50% tariff penalty on U.S. oil imports from Russia. Analysts say that by lowering the prices of ACs, tea and school supplies, India is hedging its economy against external shocks while helping domestic manufacturers.
Political and policy context
During his address to the nation on Independence Day, Prime Minister Modi pledged a “massive tax bonanza” for ordinary people and small businesses. The GST changes are now seen as fulfilling that promise.
Modi stated, on X (previously Twitter), that the revised GST structure would provide a level of benefit to farmers, middle-class families, women, youth and small retailers and also serve to make India’s economy more resilient and more business-friendly.
Going forward
While some states worry about GST revenue shortfalls, policymakers believe increased consumption will ultimately lead to increased GDP growth. The revised GST tax structure removes multiple exemptions and thresholds, streamlining compliance for traders and entrepreneurs.
India’s bold move to make everyday essentials cheaper amid global uncertainty may not only shield it from tariff shocks but also strengthen consumer confidence at home.
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