Rupee opens 9 paise up at 87.48 on Modi's big GST reform push

Indian rupee

The rupee opened 9 paise up on August 18 on the proposed next generation GST reforms announced by the Prime Minister Narendra Modi in his 79th Independence Day address in a push for self-reliance amid uncertainty over India-US trade deal.

The currency opened at 87.48 against the US dollar after ending the previous session at 87.57.

"The Indian rupee is expected to open a tad higher on the GST reforms that PM Modi recommended in his 15th August address to the nation," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, ahead of the open.

In a statement after the PM’s address, the finance ministry said the Centre has sent its proposal on rate rationalisation and reforms, specifically linked to structural reforms, rate rationalisation, and ease of living, to the group of ministers (GoM) constituted by the GST Council.

Promising next-generation reforms to the GST by Diwali, the Prime Minister said it would include a major reduction in tax rates. Addressing the nation from the ramparts of the Red Fort, he described the changes as a “Diwali gift” aimed at easing citizens’ tax burden.

“This Diwali, I am going to make it a double Diwali for you. Over the past eight years, we have undertaken a major reform in GST. Now, we are bringing next-generation GST reforms. This will reduce the tax burden across the country,” Modi said.

The announcement comes at a time when discussions are underway to rationalise GST rates for various products. A group of state finance ministers, led by Bihar deputy chief minister Samrat Chaudhary, is examining potential rate cuts. Another panel of state ministers is focusing on lowering or removing GST on health and term life insurance products, with a decision expected soon.

"For USDINR, 87.25 acts as a support while 87.70 a resistance," said Kunal Sodhani, Head of Treasury at Shinhan Bank.

The proposed revised rate structure does away with the 12 percent and 28 percent slabs, while retaining the 5 percent and 18 percent rates. Most of the products from 12 percent bracket will move to 5 percent and some to 18 percent. The highest 40 percent rate would be for some products, often referred to as sin goods, a government official said.