Union Minister Ashwini Vaishnaw has asserted that the recent Goods and Services Tax (GST) reforms were not influenced by any external factors, including the imposition of 50% tariffs by the United States. Addressing the media on Saturday, September 6, 2025, Vaishnaw stated that the reforms had been in development for over a year and were not a reaction to external pressures. He emphasized that the government has fulfilled the promise that Prime Minister Narendra Modi made in his Independence Day speech from the Red Fort.

The GST Council approved a comprehensive overhaul of the tax regime on September 3, 2025, with most goods and services now charged at rates of 5% and 18%. A 40% tax is levied on de-merit goods and sin products. Many products have moved from higher tax brackets to the 5% rate, with some shifting from 28% to 18%. Effective from September 22, 2025, the reforms mark a significant transformation in India's taxation system since the original GST implementation in 2017.

Vaishnaw highlighted that the GST reforms align with Prime Minister Modi's vision of "reform, perform, and transform". He also pointed out that the country's economy is on the right track and, with income tax relief provided for in the 2025-26 Budget, along with the GST rationalization exercise, it is set for further growth. Union Agriculture Minister Shivraj Singh Chouhan noted the tax reforms would benefit farmers, as the Centre aims to reduce the cost of production in agriculture and increase overall output.

The GST Council has simplified the indirect tax system into a two-tier structure of 5% and 18%. The earlier structure had four tiers: 5%, 12%, 18%, and 28%. The new tax regime makes insurance premiums, including life and health coverage, tax-free.

These changes are expected to boost sales of fast-moving consumer goods and consumer electronics, and are also expected to benefit carmakers. The GST reductions are expected to boost consumption, with the potential to add ₹20 lakh crore to India's GDP.

The US imposed a 50% tariff on Indian goods, affecting several sectors. Economists estimate that the tariffs could reduce India's annual GDP growth. Christopher Wood, the global head of equity strategy at the investment bank Jefferies, puts the economic blow at £41bn-£45bn, singling out textiles, footwear, jewelry and gems as “the most negatively impacted”. Chief economic advisor V Anantha Nageswaran warned that the US's 25% tariff on Indian exports will challenge business conditions and economic growth.

The GST reforms include significant administrative simplifications, such as a faster registration process for low-risk businesses and a simplified refund mechanism for exporters. The reforms address rate rationalization, administrative improvements, and dispute resolution mechanisms. The government expects a short-term revenue loss of around ₹48,000 crore (~$5.5 billion).

The GST reform of 2025 represents India's most ambitious fiscal policy transformation in recent years. By simplifying the tax structure, reducing rates on essential goods, and improving administrative efficiency, the government has created a framework that balances revenue requirements with economic growth objectives.