New Delhi, Aug. 29 -- In his Independence Day address to the nation, Prime Minister Narendra Modi promised a Diwali gift in the form of sweeping goods and services tax (GST) reforms. This announcement comes just as India faces fresh pressure from abroad. With US President Donald Trump's steep 50% tariffs on Indian exports now in effect, reviving domestic demand has become critical.

If the plan goes through, GST slabs will be rationalized in a way that lowers the tax burden across most consumer goods. Reports suggest the 12% and 28% slabs will be scrapped, with nearly all items in the 12% category moving down to 5% or zero, and most of the 28% slab items shifting into the 18% bracket. Sin and luxury goods will remain heavily taxed at 40%,...