India, Aug. 16 -- Prime Minister Narendra Modi on Friday announced a major overhaul of the goods and services tax regime, hinting at lower rates on most items by Diwali, with people aware of the plans adding that most of the goods currently taxed at 12% could drop to 5% and most of those in the 28% bracket could shift to 18% under a proposed structure that will also have a 40% rate for what are considered sin or luxury goods.

Speaking from the Red Fort ramparts on the 79th Independence Day, Modi said his government would implement "next-generation GST reforms" that would substantially reduce the tax burden across the country, particularly benefiting farmers, the middle class and small businesses. Since GST is a consumption tax, the ultim...