The sweeping overhaul of the Goods and Services Tax (GST) announced by the Centre has been welcomed in the Andaman and Nicobar Islands, with the local leadership of the Bharatiya Janata Party (BJP) terming it a move that will ease the financial burden on households while stimulating broader economic growth. The announcement, which was made by the Union government earlier this week, replaces the previous four-tier GST structure with a simplified two-tier system. The new framework introduces standard rates of 18% and 5%, along with a 40% demerit rate reserved for luxury goods, in what has been described as a major tax reform exercise.
Anil Kumar Tiwari, the BJP State President for the Andaman and Nicobar Islands, expressed appreciation for the changes, crediting the leadership at the Centre for following through on earlier commitments. He noted that the move was consistent with the Prime Minister’s Independence Day assurance from the Red Fort, where a rationalised tax system was promised to ease the lives of ordinary citizens. According to Tiwari, the new framework is expected to bring down prices across a wide range of commonly used items including household goods, packaged food, pharmaceuticals, and electronics. He added that reduced tax burdens could place many products within the reach of lower-income groups who had previously found them unaffordable.
The reforms come at a time when consumers across the country are preparing for the festival season, which traditionally drives higher consumption of both essential and discretionary products. By reducing costs at the point of sale, the government expects a spike in retail demand. This boost in consumption could, in turn, generate a multiplier effect on the economy by supporting manufacturing, logistics, and allied industries. Officials at the Centre have argued that simplifying the tax structure will also cut down on compliance burdens for small and medium businesses, further encouraging market activity.
The change from a four-tier system to a two-tier one is also being seen as a long-term structural adjustment aimed at improving transparency and predictability. Previously, the multiplicity of rates across categories had created confusion for both consumers and traders, while also inviting criticism for its complexity. The new arrangement is likely to reduce classification disputes and bring clarity for tax administration. The government has also retained a high demerit rate of 40% for luxury items, ensuring that the reform does not come at the cost of equity. Goods falling into this category will continue to contribute more significantly to tax revenues.
Tiwari, while hailing the announcement, emphasised its local relevance. In the island territories, where freight and logistics already add to the costs of daily essentials, even a small reduction in tax rates can have a visible effect on affordability. Lower effective prices could allow residents to allocate savings to other areas such as healthcare, education, or investment in small enterprises. For households dependent on seasonal or irregular income, the timing of the reform ahead of the festival season could translate into higher purchasing power during a crucial period.
Observers note that tax reforms of this scale often take time to translate into consumer benefits, depending on how quickly manufacturers and retailers pass on the reduced rates. Nevertheless, the BJP in the islands has projected optimism that the impact will be immediate and significant. The emphasis on affordability is being linked to broader policy goals of inclusive growth, with the expectation that wider access to products will reduce inequality in consumption. By making electronic goods and pharmaceuticals cheaper, the reforms also align with longer-term developmental goals such as digital access and healthcare expansion.
While some economists have cautioned that the success of the reform will depend on effective enforcement and regular review, the government has positioned it as a milestone in the ongoing effort to streamline India’s indirect tax system. For island residents, the ultimate test of its success will lie in how visible the price reductions are in local markets in the coming weeks. As consumption trends emerge during the festive months, policymakers will be closely watching whether the reform delivers on its twin promises of affordability for citizens and growth for the economy.
