Countering the 50% US Tariff "Headwind" with a Domestic Demand Boost — India Significantly Cuts Taxes on Consumer Goods! A New Strategy to Revitalize the Economy Affected by US Tariffs

The Indian government plans to simultaneously reduce the Goods and Services Tax (GST) on hundreds of items to support domestic demand amid the headwinds of high tariffs imposed by the United States. The tax rate system will be simplified to essentially focus on two main pillars: "5% and 18%." Everyday items like shampoo and toothpaste will see a reduction from 18% to 5%, while small cars, televisions, and air conditioners will drop from 28% to 18%. Personal life and health insurance will become tax-exempt, with implementation scheduled for September 22, 2025. The government and states anticipate a total revenue loss of approximately 480 billion rupees, but expect it to be offset by stimulated demand. Meanwhile, high tax rates of 40% will be maintained or strengthened for tobacco and luxury items. On social media, opinions are divided, with some praising the move as "household-friendly" and others expressing concern that companies might not pass on the price reductions. Memes are also spreading. The stock and currency markets generally view the changes positively, but challenges remain regarding the impact on public finances, the practicalities of the transition, and the monitoring of anti-profiteering measures.