The Goods and Services Tax (GST) overhaul will simplify India’s complex four-tier system into two slabs and cut levies across sectors – in some cases by more than half – announced finance minister Nirmala Sitharaman.

The tax cut will make a whole range of key consumer items, from soap bars to motorbikes, cheaper, but it is likely to strain public finances.

The measures come after US President Donald Trump imposed tariffs of up to 50% on Indian imports, raising fears of an economic slowdown.

Sitharaman insisted the GST cuts were not linked to the “tariff turmoil”, saying they were part of long-planned reforms.

Prime minister Narendra Modi hailed the changes.

“The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” his office said in a social media statement.

The new tax regime makes insurance premiums, including life and health coverage, tax-free while cutting levies on motorbikes and small cars from 28% to 18%.

Dozens of life-saving drugs are also tax exempt, according to a finance ministry note.