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GST Rate Cuts
India overhauled its tax regime in 2025 with sharp cuts in Goods and Services Tax (GST) rates and a higher income tax exemption limit, with the spotlight now turning to customs duty rationalisation and procedural simplification in the coming Budget. Next year will see the new simplified Income Tax Act, 2025, to come into effect from April 1, replacing the over six-decade-old current Income Tax Act, 1961. Also, two new laws -- one to levy additional excise duty on cigarettes and another to levy cess on pan masala over and above GST rates -- will be implemented on a date decided by the government. The tax reforms rolled out by the government in 2025 were aimed at stimulating demand amid a challenging global economic environment. With tariff uncertainties casting a shadow over economic decision-making, India's tax reform measures focused on boosting domestic demand to drive consumption and support growth. A key highlight was the reduction of GST rates on about 375 goods and services .
Significant regulatory transformations such as GST 2.0 and progressive customs reforms are likely to accelerate investment flows, promote EV adoption, and drive the next wave of Indo-Japan collaboration in clean mobility and advanced manufacturing, according to a report. With USD 43.3 billion in cumulative investments, Japan is India's fifth-largest foreign investor. A deeper utilisation of the Indo-Japan FTA will be key to driving competitiveness, enabling technology transfer, and advancing India's journey toward a sustainable, innovation-led automotive future, Grant Thornton Bharat and the Indo-Japan Chamber of Commerce and Industry (IJCCI) said in a joint whitepaper. "The convergence of GST 2.0 and targeted customs incentives marks a defining moment for India's automotive sector. Reduced tax rates, simplified compliance, and supply-chain-focused exemptions will not only elevate India's cost competitiveness but also strengthen its positioning as a manufacturing and export hub for .