The recent goods and services tax (GST) rationalisation is expected to lift the revenue growth of organised apparel retailers by around 200 basis points (bps) this fiscal, keeping topline growth steady at 13–14 percent for the second consecutive year, according to a report by Crisil Ratings released on Monday.
The report said the GST rate cut on apparel priced below Rs 2,500 will stimulate demand in the mid-premium segment, while the fast-fashion or value segment will continue to be the primary growth driver.
Although the relief is limited, Crisil noted that it provides timely support to sustain growth momentum in the sector.
The uniform 5 percent GST rate — replacing the earlier dual structure of 5 percent on apparel below Rs 1,000 and 12 percent between Rs 1,000 and Rs 2,500 — has expanded the consumption base and improved affordability for a wider segment of buyers, the report observed, according to PTI.
Conversely, the increase in GST from 12 percent to 18 percent on apparel priced above Rs 2,500 is likely to weigh on premium categories such as wedding wear, woollens, handlooms, and embroidered garments.
Crisil said the premium segment accounts for around 35 percent of organised apparel sales.
“Extending the 5 percent GST slab to apparel priced up to Rs 2,500 boosts price competitiveness across the fast-fashion and mid-premium segments, where customers are particularly price-sensitive,” said Senior Director of Crisil Ratings. “With the timing of the GST rate cut coinciding with the festive season, demand should strengthen as middle-class spending picks up.”
The report pointed out that the apparel industry had witnessed six consecutive quarters of moderate growth, despite festive periods and extended discounting.
The GST revision, therefore, is expected to revive consumer sentiment, especially among buyers in the Rs 2,500–Rs 3,500 price range.
Crisil added that apparel retailers with a higher share of premium sales may absorb part of the GST hike to maintain demand during the festive and wedding seasons.
“However, lower cotton prices and the reduction of GST on synthetic fibres and yarn—from 18 percent and 12 percent to a uniform 5 percent—will help ease input costs,” said the Director of Crisil Ratings.
Overall, the report said, the GST revisions reflect India’s evolving consumption dynamics, driven by rising middle-class incomes, urbanisation, and a growing preference for affordable, fashion-forward clothing.
