Finance minister Nirmala Sitharaman recently revealed that the indian government is preparing a comprehensive relief package for exporters affected by steep US tariffs while also rolling out major GST reforms aimed at reducing prices and stimulating the economy. Here’s a breakdown of the key developments.

1. Relief Package for Exporters

The US has imposed 50% tariffs on several indian exports, affecting sectors like textiles, gems and jewellery, leather, shrimp, chemicals, and electrical/mechanical machinery. These duties came in two stages: 25% initially, followed by another 25% from August 27, making them some of the highest tariffs globally.

Sitharaman said a multi-ministry assessment is underway to gauge the full impact. “We are getting inputs from the affected industries. Something is being worked out to hand-hold the exporters affected by the US tariff,” she stated.

2. Labour-Intensive industries Take the Hit

The most affected sectors are largely labour-intensive, relying heavily on exports for revenue and employment. industries like textiles, leather, and jewellery face significant challenges, while pharmaceuticals, energy products, and electronics are not included under the new duties.

3. India-US Trade Relations

The US is India’s largest trading partner since 2021-22. In 2024-25, india exported USD 86.5 billion worth of goods to the US, while imports totaled USD 45.3 billion, amounting to USD 131.8 billion in bilateral trade. Around 20% of India’s total exports go to the US, highlighting the importance of supporting exporters affected by these tariffs.

4. GST Reform: Simplifying the Tax Structure

In parallel, Sitharaman unveiled a major GST overhaul, calling it a “people’s reform” that will benefit all 140 crore Indians. Key changes include:

· Two main slabs: 5% for essentials and 18% for most other goods

· 40% GST only for sin goods and ultra-luxury items

· Removal of the 12% and 28% slabs

· Nearly 400 products will become cheaper, including soap, shampoo, clothes, cars, ACs, and tractors

· Bread, milk, and paneer will now be tax-free

· Life and health insurance premiums will also see zero GST

The new rates take effect from September 22, coinciding with the start of Navaratri.

5. Monitoring Price Pass-Through

Sitharaman emphasized that the government is personally monitoring whether companies pass GST benefits to consumers. Several sectors, from car manufacturers to insurance providers, have already announced price cuts. More reductions are expected as the new rates are implemented.

6. Economic and Social Impact

· Reduced cost of living: Lower GST on essentials benefits all income groups, including the poorest

· Boost in consumption: Cheaper goods are expected to drive higher demand

· Support for exporters: Relief packages aim to safeguard indian industries affected by US tariffs

· Financial inclusion: Lower insurance premiums and tax-free essentials improve accessibility and affordability

7. Final Takeaway

The government’s twin strategy of exporter relief and GST reform addresses both external trade challenges and domestic consumer welfare. According to Sitharaman, this is the biggest tax reform since GST was launched in 2017, designed with the common man in mind, and expected to have a broad-based economic impact.

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