Garments Priced Above ₹2.5K to be Costlier, will Hurt Middle-Class Affordability: Industry Bodies

Garments priced above ₹2,500 per piece will become more expensive with GST rates on these items being increased to 18% from 12%, a step which industry bodies said will hurt middle-class affordability and weaken organised retail and the garment sector.

Retailers Association of India (RAI) and Clothing Manufacturers Association of India (CMAI), while welcoming the two-slab GST framework and removal of inverted duty structure across the textile value chain, argued that garments priced above ₹2,500 are also consumed in large numbers by the common man and the middle class.

The GST Council, in its meeting held on Wednesday, approved increasing the GST rate from 12% to 18% on apparel and clothing accessories of sale value exceeding ₹2,500 per piece and also on other made-up textile articles, sets of sale value exceeding ₹2,500 per piece.

While GST on footwear of sale value not exceeding ₹2,500 per pair has been cut to 5% from 12%, for those exceeding ₹2,500 per pair has been maintained at 18%.

Placing garments and footwear priced above ₹2,500 in the 18% GST slab could hurt middle-class affordability and weaken organised retail and the garment sector, RAI said in a statement.

"All garments and footwear should ideally be taxed at 5%, or at the very least, a more reasonable price threshold should be established," it noted.

Expressing similar views, CMAI said in the entire value chain from fibre to garment, garments above ₹2,500 are the only products which are not at 5%.

"Garments above the price of ₹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 ₹2,500 - all of which will see a significant price increase due to this change of GST rate," it noted.

Asking the GST Council to remove this anomaly, CMAI said either place all garments, irrespective of the price, at 5% or fix a more reasonable and realistic price level.

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

Nevertheless, the retailers' body welcomed the "cleaner two-slab GST framework", calling it a vital step towards simpler and fairer taxation.

This reform is expected to lower consumer prices overall, stimulate demand and consumption, enhance the ease of doing business, particularly for retailers and MSMEs and support overall retail sector growth.

Similarly, CMAI also welcomed the removal of the inverted duty structure by making the entire value chain from fibre onwards charged at one rate, 5% -- and adopting a fibre-neutral policy, by equating the man-made fibres and cotton fibre chains.