GST rationalisation: Organised apparel retailers to see 200 bps growth lift; festive demand, affordability key drivers

The recent rationalisation of Goods and Services Tax (GST) is expected to lift revenue growth in India’s organised apparel retail sector by about 200 basis points this fiscal, keeping it steady at 13-14 per cent for the second consecutive year, according to Crisil Ratings. The assessment is based on an analysis of nearly 40 organised retailers, representing about one-third of the sector’s revenue.The move to a uniform 5 per cent GST on apparel priced below Rs 2,500—replacing the earlier dual structure of 5 per cent below Rs 1,000 and 12 per cent up to Rs 2,500—is set to stimulate demand in the mid-premium category. As per news agency ANI, Crisil noted that fast-fashion and value segments will continue to be the main growth drivers.However, the GST increase from 12 per cent to 18 per cent on apparel priced above Rs 2,500 is expected to soften demand in the premium category, which includes wedding wear, handlooms, woollens and embroidered garments. The impact will likely remain limited as the premium segment contributes only about 35 per cent of total organised apparel sales. With roughly 65 per cent of sectoral revenue coming from products priced under Rs 2,500, the benefits to the mid and value segments should offset the slowdown at the upper end.Anuj Sethi, senior director at Crisil Ratings, said, “Extending the 5 per cent GST slab to apparel priced up to Rs 2,500 boosts price competitiveness across the fast-fashion/value and mid-premium segments, whose customers are price-sensitive. With the timing of the GST rate cut coinciding with the festive season, demand should increase as middle-class spending picks up.”As per ANI, Sethi added that benign inflation, easing food costs, and faster fashion-refresh cycles will likely help retailers sustain double-digit growth by supporting discretionary spending.According to Crisil, the GST revision follows six straight quarters of moderate sector growth, with affordability expected to improve as inflation cools. While the higher levy on premium wear could restrain growth, the impact might be absorbed by retailers targeting festive-season buyers in the Rs 2,500–Rs 3,500 range.Poonam Upadhyay, director at Crisil Ratings, noted, “Apparel retailers with a higher share of premium sales may choose to absorb part of the GST hike to sustain demand during the ongoing festive and wedding season.” She added that lower cotton prices and GST cuts on synthetic fibres and yarn—to a uniform 5 per cent—will reduce input costs, helping the sector’s operating margin inch up to 14.0–14.5 per cent this fiscal from 14 per cent last year, despite high marketing expenses.Crisil concluded that the GST overhaul aligns with India’s evolving consumption trends, driven by rising middle-class incomes, urbanisation and growing demand for affordable, fashion-forward apparel.