India cuts taxes on hundreds of goods to counter U.S. tariffs

India will reduce taxes on hundreds of consumer goods, including air conditioners and small cars, to boost local demand amid steep U.S. tariffs, the government announced Wednesday.

Finance Minister Nirmala Sitharaman said the revised goods and services tax (GST) will take effect on September 22, ahead of the Hindu festival season. The overhaul reduces GST tiers from four to two rates: 5% and 18%, while a few high-end items, such as luxury cars and tobacco, will face 40%, and life and health insurance will remain tax-free.

The move is part of Prime Minister Narendra Modi’s strategy to shield the Indian economy from U.S. tariffs, which threaten $48.2 billion in exports following last month’s additional 25% duty imposed by Washington in response to India’s Russian oil imports.

Modi said the reforms aim to improve citizens’ lives and ease business operations, particularly for small traders and manufacturers.

India–U.S. trade relations have grown in recent years but remain vulnerable to disputes over market access and domestic political pressures.

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