India shields it's economy by revamping tax structure

At a time when punitive tariffs from the United States threaten to squeeze exports and dampen investments, India has chosen to shield its economy by revamping the tax structure to stimulate domestic demand.

- By Tirthankar Mitra

This is an unusual weapon to counter an external economic assault: providing cheaper goods for its citizens.

The Goods and Services Tax (GST) has often been criticised for its complexity, but it has now been pared down to simpler slabs of 5 and 18 per cent.

A steep 40% rise has been imposed on sin goods such as cigarettes—hardly a move anyone will object to. The new GST is more than a technical correction; it is both a political and economic signal.

With global trade conditions uncertain, the GST change underscores the government's intent to power India through this turbulence with domestic consumption.