GST reforms to raise India's apparel retail sector's revenue growth

The GST rate cut on apparel priced below ₹2,500 is likely to lift demand in the mid-premium segment, while the fast fashion/value segment will continue to drive the momentum. The GST relief, though limited, provides timely support to sustain growth, it noted.

The uniform 5-per cent GST rate versus the previous dual structure of 5 per cent below ₹1,000 and 12 per cent between ₹1,000 and ₹2,500has widened the consumption base.

Conversely, the increase in the GST rate on apparel priced above ₹2,500 from 12 per cent to 18 per cent has weighed on premium categories, including wedding wear, woollens, handlooms and embroidered clothing. The premium segment accounts for about 35 per cent of organised apparel sales.

With the fast-fashion/value and mid-premium apparel (largely priced below ₹2,500) segments accounting for almost 65 per cent of the sector’s revenue, stronger traction in these price bands will likely offset muted growth in the higher-priced apparel segment, said Crisil Ratings, after analysing nearly 40 organised apparel retailers, accounting for approximately a third of the sector’s revenue.

The impact will likely be most visible among buyers in the ₹2,500-₹3,500 range. Many in this bracket may shift towards slightly lower-priced apparel in the 5-per cent GST slab, which offers comparable style and quality.

ALCHEMPro News Desk (DS)