India’s organised apparel retail sector is set to gain about 200 basis points (bps) in revenue growth this fiscal, following the recent rationalisation of the goods and services tax (GST), according to Crisil Ratings. The move is expected to sustain sector growth at 13–14% for the second consecutive year.
The GST cut for apparel priced below Rs 2,500 is likely to spur demand in the mid-premium segment, while fast-fashion and value offerings continue to drive momentum. The uniform 5% GST rate, replacing the previous dual structure of 5% on items below Rs 1,000 and 12% on Rs 1,000–2,500, has widened the consumption base.
Conversely, the increase in GST to 18% on apparel priced above Rs 2,500 may weigh on premium categories, including wedding wear, woollens, handlooms, and embroidered clothing, which together account for around 35% of organised apparel sales.
Anuj Sethi, Senior Director, Crisil Ratings, said, “Extending the 5% 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. Moreover, benign inflation, easing food cost and faster fashion-refresh cycles will help retailers gain a modest share-of-wallet advantage in discretionary categories, leading to sustained sectoral revenue growth of 13-14% this fiscal.”
Poonam Upadhyay, Director, Crisil Ratings, added, “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, when buying activity is buoyant. However, lower cotton prices and the reduction of GST on synthetic fibres and yarn from 18% and 12% to a uniform 5%, will ease input cost. As a result, given raw materials account for almost two-thirds of production cost, the sector’s operating margin is expected to inch up to 14.0-14.5% this fiscal from~14% last fiscal, even as marketing spending remains elevated amid intense competition across both the value and mid-premium segments.”
The GST revisions reflect India’s changing consumption patterns, driven by rising middle-class incomes, urbanisation, and a shift toward affordable, fashion-forward apparel. However, discretionary spending remains sensitive to inflation and wage trends, making consumer sentiment a key factor to watch.
