Details of major tax reforms in India revealed! Consumption tax on nearly 175 types of products may be reduced by at least 10 percentage points.

Two sources revealed that India plans to cut consumption tax by at least 10 percentage points on nearly 175 products, covering items such as shampoo, hybrid cars, consumer electronics, etc. This is the new detail regarding the tax reform proposed by Indian Prime Minister Modi. Modi suddenly announced the reduction of consumption tax in a public speech on August 15, catching even officials within the Indian government off guard. According to media reports citing government sources, the officials had originally planned to announce the tax reform plan months later, and even the finance ministers of various states were not consulted in advance. India plans to simplify the Goods and Services Tax (GST) from four tax rates to two, while establishing a high-level committee to specifically promote simplifying administration and decentralization, aiming to change the international image of "doing business difficulties". Through simplifying tax systems and bureaucratic procedures, the Modi government hopes to eliminate obstacles to investment, hinder major projects, and impact economic growth due to layers of approval, overlapping regulations, and slow processes. The tax reform proposal of the Modi government shows that the GST rates on consumer goods such as talcum powder, toothpaste, and shampoo will be reduced from 18% to 5%, expected to boost sales for companies like Hindustan Unilever, Godrej Industries, etc. The GST rates on consumer electronics products like air conditioners and TVs may be reduced from 28% to 18%, with brands like Samsung, LG Electronics, and Sony expected to dominate sales during the upcoming Diwali shopping season starting in October. The GST rates on small gasoline hybrid cars will be reduced from 28% to 18%, which is positive for companies like Toyota and Maruti Suzuki - these companies have been lobbying the Indian government for years to reduce the taxes on such models, on the grounds that the technology is cleaner than traditional gasoline cars. The list of goods and services in India planning to reduce taxes will be decided by the GST Council on September 3-4. The committee is chaired by Union Finance Minister Nirmala Sitharaman and includes representatives from various states. It is noteworthy that the timing of Modi's announcement of tax reform is quite intriguing. After Trump threatened to impose a 50% tariff on India earlier in August, analysts including Citigroup estimated that India's Gross Domestic Product (GDP) annual growth rate faced a downside risk of 0.6-0.8 percentage points. For India, where consumption and corporate spending account for over 60% of GDP, the reduction in GST is expected to ease the impact of tariff friction. Economist Garima Kapoor of Elara Capital said, "An increase in consumption could help offset the impact of the scenario where the US and India do not reach an agreement." IDFC First Bank Ltd. estimates that lowering consumption tax will help increase nominal economic growth by 0.6 percentage points, with the impact on inflation expected to pull down by 0.6-0.8 percentage points, releasing effects within 12 months. However, Emkay Global Financial Services Ltd. also predicts that the Indian government's revenue reduction will account for about 0.4% of GDP, with states expected to bear relatively greater pressure of income reduction. Furthermore, the Indian government's tax reform coincides with S&P upgrading India's sovereign rating to BBB, the first rating increase in 18 years for the country. Against the backdrop of Trump's tariff threats and economic growth slowdown, the tax reform and rating upgrade inject some confidence for investors.