GST Gamble

India has chosen an unusual weapon to counter an external economic assault: cheaper goods for its own citizens.

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At a time when punitive tariffs from the United States threaten to squeeze exports and dampen investor sentiment, New Delhi has opted to shield its economy not through retaliation, but by revamping its tax structure to stimulate domestic demand.

The Goods and Services Tax (GST), often criticised for its complexity, has now been pared down to two simple slabs of 5 and 18 per cent, alongside a steep 40 per cent rate on sin goods such as cigarettes. This is more than a technical correction. It is a political and economic signal: the government wants consumption to power India through an uncertain global trade environment.

By lowering taxes on food items, school supplies, insurance, and household appliances, the government is targeting the middle class and small businesses directly. These are the groups most vulnerable to both inflationary pressures and trade shocks.