GST revamp: Clothes priced over Rs 2500 to become costlier; here is what industry leaders say

Garments worth more than Rs 2,500, will now attract a higher Goods and Services Tax (GST) of 18%, up from the earlier 12%. Industry bodies have cautioned that the move will weigh on middle-class affordability and could weaken both organised retail and the garment sector.

The GST Council, at its meeting on Wednesday, approved the rate increase on apparel and clothing accessories valued above Rs 2,500 per piece, along with other made-up textile articles and sets in the same price range.

In contrast, the tax on footwear costing up to Rs 2,500 per pair has been reduced from 12% to 5%. For pairs priced above Rs 2,500, the GST remains unchanged at 18%.

The Retailers Association of India (RAI) and the Clothing Manufacturers Association of India (CMAI) welcomed the two-slab GST structure and the correction of the inverted duty system across the textile chain, but stressed that garments priced above Rs 2,500 are widely bought by the common man and middle-class consumers.

It said that the decision could undermine affordability and growth in organised retail. "All garments and footwear should ideally be taxed at 5%, or at the very least, a more reasonable price threshold should be established," it said in a statement quoted by PTI.

Sharing similar concerns, the Clothing Manufacturers Association of India (CMAI) argued that garments priced above Rs 2,500 are widely purchased by the middle class. "Garments above the price of Rs 2,500 are also consumed in large numbers by the common man and middle class, especially woollen clothing, occasion wear, Indian traditional clothing, handlooms, embroidered clothes produced by artisans and traditional weavers are all priced above this limit of Rs 2,500 - all of which will see a significant price increase due to this change of GST rate," it said.

The CMAI urged the Council to correct what it described as an anomaly. It said either all garments should be taxed at 5% or a more realistic threshold should be fixed.

The RAI also reiterated its demand for GST on commercial rentals for retail outlets to be reduced from 18% to 5% to "support retail viability and eliminate inverted duty structures across key categories."

Despite these concerns, both RAI and CMAI welcomed the broader reform of moving to a two-slab GST structure and the removal of the inverted duty structure across the textile chain, PTI reported.

According to RAI, the changes are expected to reduce consumer prices overall, stimulate demand and consumption, improve ease of doing business for retailers and MSMEs, and support retail sector growth. The CMAI too welcomed the adoption of a fibre-neutral policy by aligning man-made and cotton fibres under the same 5% rate.