MUMBAI: The recent rationalisation of Goods and Services Tax (GST) is expected to boost revenue growth of organised apparel retailers by around 200 basis points (bps) this fiscal, keeping topline expansion steady at 13–14 per cent for the second consecutive year, Crisil Ratings said in a report on Monday.
According to the report, the GST rate cut on apparel priced below ₹2,500 will likely spur demand in the mid-premium segment, while the fast-fashion and value categories will continue to drive overall momentum. Though modest, the GST relief offers timely support to sustain growth, it added.
The move to a uniform 5 per cent GST rate—replacing the earlier dual structure of 5 per cent on garments below ₹1,000 and 12 per cent on those priced between ₹1,000 and ₹2,500—has broadened the consumption base.
However, the increase in GST on apparel priced above ₹2,500 from 12 per cent to 18 per cent has dampened sentiment in the premium category, which includes wedding wear, woollens, handlooms, and embroidered clothing. The premium segment accounts for about 35 per cent of organised apparel sales, Crisil noted.
“Extending the 5 per cent GST slab to apparel up to ₹2,500 enhances price competitiveness in the value and mid-premium segments, where customers are price-sensitive. With the festive season underway and middle-class spending on the rise, demand should pick up,” said Anuj Sethi, Senior Director at Crisil Ratings.
The report highlighted that this development comes after six consecutive quarters of moderate growth despite prolonged discounting and festive sales efforts. The strongest impact is expected among consumers in the ₹2,500–₹3,500 price bracket.
“Retailers with a larger share of premium products may absorb part of the GST hike to sustain demand during the ongoing festive and wedding season. Meanwhile, lower cotton prices and the uniform 5 per cent GST on synthetic fibres and yarn—down from 18 per cent and 12 per cent—will help ease input costs,” said Poonam Upadhyay, Director at Crisil Ratings.
Overall, the GST revisions reflect India’s shifting consumption landscape, shaped by rising middle-class incomes, urbanisation, and growing preference for affordable yet fashion-forward clothing, the report concluded.
