In response to the negative effects of US President Donald Trump’s punishing tariffs, India has announced tax cuts on hundreds of consumer goods, including those that range from soap to small cars.
The measures come as the US tariffs, which have already been in effect, have sparked concerns about a slowdown in the economy.
Finance Minister Nirmala Sitharaman announced that the Goods and Services Tax (GST) had been updated to make the country’s complicated four-tier system simpler by splitting the GST into two slabs and reducing levies across sectors, some of which by more than half.
A panel, which examined the GST reforms, approved cuts on consumer goods like toothpaste and shampoo from 18% to 18% and those for small cars, air conditioners, and televisions from 18% to 28 percent, according to Sitharaman.
Instead of the currently four rates, the panel, led by Sitharaman, approved the two-rate structure of 5 and 18 percent.
Insurance premiums, including those for life and health, are exempt from taxation under the new tax law.
The finance minister argued that the “tariff turmoil” was not the result of the GST cuts, claiming that they were intended as part of long-planned reforms.
According to estimates, federal and state governments will lose 480 billion Indian rupees ($5.49 billion) as a result of the budget cuts starting on September 22 during the Hindu festival of Navratri.
Super luxury and sin products are subject to a 40% tax.
The South Asian nation’s economy, whose economy increased unexpectedly higher by 7.8% in the quarter to June, is expected to benefit from the GST reductions, which were announced in February.
Any potential revenue impact will be more than offset by the consumption boost, according to Soumya Kanti Ghosh, SBI’s chief economist.
“The fiscal deficit will experience a nearly unintended or even positive impact.”
The minister said the panel approved a 40 percent tax on “super luxury” and “sin” goods like cigarettes, cars with engines larger than 1,500 cubic meters (91. 5 cu inches) and carbonated beverages.
Sales of fast-moving consumer goods companies like Samsung Electronics, LG Electronics, and Sony are anticipated to increase as a result of the move.
Toyota, Suzuki, and Maruti are expected to be significant success. Prime Minister Narendra Modi’s demand for greater independence in India led to the rush to lower the tax, which would have previously been pledged to lower the GST by October in response to US tariffs of up to 50%.
Source: Aljazeera
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