India Plans GST Cuts on Cars, Consumer Goods in Biggest Tax Overhaul in a Decade: Reuters

India is planning to slash consumption tax by at least 10 percentage points on nearly 175 products, including shampoos, hybrid cars and consumer electronics, Reuters reported on Monday, citing two sources familiar with the matter.

According to the report, this would mark the biggest reform of the goods and services tax (GST) system in nearly a decade. The move comes as Prime Minister Narendra Modi pushes for greater use of Indian-made products amid strained trade ties with the United States.

Modi, who had first flagged the reform during his Independence Day address last month, said he aimed to make daily-use items cheaper for people in the world’s fifth-largest economy. Reuters noted that consumer goods such as toothpaste, talcum powder and shampoo could see GST rates fall from 18% to 5%, benefiting companies like Hindustan Unilever and Godrej Industries.

Air conditioners and television sets may also witness a reduction in GST from 28% to 18%, ahead of the crucial Diwali shopping season, when brands such as Samsung, LG Electronics and Sony typically see peak sales, the report said.

India’s GST Council, chaired by Finance Minister Nirmala Sitharaman and including state representatives, is scheduled to finalise the list of items for tax cuts during its September 3-4 meeting. The finance ministry did not immediately respond to Reuters’ request for comment.

The proposed cuts are also aimed at offsetting an anticipated decline in exports to the U.S. by spurring domestic consumption, raising farm incomes and strengthening self-reliance among Indian manufacturers, Reuters added. Tax relief is expected for export-linked items such as fertilisers, farm machinery and tractors, with GST potentially dropping to 5% from the current 12–18%. The textile sector, hit by U.S. tariffs, is also set to benefit.

In the automobile sector, Reuters reported that the government has proposed cutting GST on small petrol hybrid cars to 18% from 28%, a move likely to benefit Toyota and Suzuki. While Japanese carmakers have long lobbied for such a cut, Indian EV makers Tata Motors and Mahindra & Mahindra have raised concerns that cheaper hybrids could slow the country’s transition to electric mobility.

The government also plans to lower GST on commuter motorcycles and scooters under 350cc, which account for about 95% of the nearly 20 million two-wheelers sold annually by companies such as Bajaj Auto, Hero MotoCorp and TVS Motor. Small car sales, dominated by Maruti Suzuki along with Hyundai and Tata Motors, are also expected to rise.

Meanwhile, bigger cars—over 4 meters long with higher engine capacity—will see GST rise from 28% to 40%, though Reuters said the government may reduce additional levies to keep the overall tax burden steady at about 50%.

On the revenue side, the government is also considering raising GST rates on coal and on services such as betting, casinos and horse racing, while maintaining existing levies on carbonated drinks produced by PepsiCo, Coca-Cola and Reliance Industries, despite industry calls for tax relief.