From high streets to mass markets, GST brings affordable fashion to the forefront

16 September 2025, Mumbai 

When Finance Minister Nirmala Sitharaman announced sweeping changes in the Goods and Services Tax (GST) regime, the Indian apparel industry immediately felt the tremors.

Read our latest issue

For an industry that contributes 2 per cent to India’s GDP and employs over 45 million people, the reforms mark a new turning point. With revised tax slabs designed to make Indian apparel globally competitive, while also making affordable fashion accessible to millions of consumers, the government’s move has ignited both optimism and concern across the sector.

Join our group

Affordable fashion gets a boost

The most celebrated aspect of the reform is the reduction of GST on garments priced up to RS 2,500 from 12 per cent to 5 per cent. This segment represents the bulk of India’s apparel demand, driven by middle-class and low-income households.

In fact, Raymond Lifestyle has already announced plans to slash prices on select apparel lines, while retailers like Reliance Trends and Max Fashion are gearing up for aggressive marketing campaigns to capture the newly price-sensitive consumer. “A lower GST rate on mass-market apparel is a game-changer. It enables us to serve India’s growing aspirational middle class without compromising on margins,” said Sanjay Behl, CEO of Raymond Lifestyle.

Join our community

Table: GST rate changes in apparel sector

Price segment Earlier GST rate New GST rate Impact Garments ≤ ₹2,500 12% 5% Affordable fashion, middle-class push Garments > ₹2,500 12% 18% Premium brands, luxury retail MMF Fibers & Yarns 12% 5% Input costs reduced, export boost

The new tax structure has set about a wave of adjustments among brands and retailers. Focus on value fashion has increased with fast-fashion chains and domestic retailers recalibrating portfolios to strengthen offerings under Rs 2,500.

Visit for more

Manufacturing has become more competitive that is because with a lower GST on man-made fibers (MMF) and yarns, production costs are expected to drop, giving Indian textiles a boost against competitors like Bangladesh and Vietnam. Exports are expected to revive as India’s textile exports stood at $44.4 billion in FY25. With reduced input costs, the sector is aiming for the government’s ambitious target of $100 billion by 2030.

DFU Profile

Premium brands under pressure

While affordable fashion enjoys newfound relief, the story is starkly different for premium apparel. The hike to 18 per cent GST for garments above Rs 2,500 puts brands like Zara, Levi’s, Lacoste, and Superdry in a difficult spot. For global retailers, India’s premium fashion market is relatively young but rapidly growing.

The GST hike risks cooling consumer demand at a time when the middle class is increasingly seeking aspirational purchases.

SUSTAINABILITY

Responses being considered

Absorbing costs vs. price hikes: Brands may choose to absorb the higher levy temporarily to retain demand.

Portfolio adjustments – Launching more mid-range products priced below Rs 2,500 to bypass the higher GST slab.

Brand premiumization: Justifying higher prices through campaigns highlighting quality, durability, and brand value.

“The Rs 2,500 threshold is arbitrary. Premium apparel is not luxury middle-class families buy it for weddings, festivals, and aspirational wear. The higher GST risks shrinking this market,” points out Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI).

Visit for more

In fact, Aditya Birla Lifestyle Brands shares fell 0.7 per cent after the GST announcement, reflecting investor concerns about the impact on premium apparel lines. Vedant Fashions (Manyavar) known for wedding and festive ethnic wear, saw a knee-jerk market reaction. Experts warn the higher GST on festive apparel could push consumers to the unorganized sector. Superdry India with most of its products priced above Rs 2,500 faces a direct hit and may need to rethink its India pricing strategy.

While the government’s intent is clear, making affordable apparel more accessible and boosting exports the differential GST rates have polarized opinion. The Punjab Textile Merchants Association has demanded a uniform 5 per cent GST on all apparel, regardless of price, arguing that the Rs 2,500 cap is regressive. CMAI too has called the premium GST hike a “death knell for formal and festive apparel,” warning that it could drive consumers back to the unorganized sector, undermining the government’s push for formalization.

Know More

India vs global competitors

One of the goals of the GST reforms is to make India’s apparel industry more competitive globally. However, compared to other leading textile exporters, India still faces challenges in balancing consumer affordability and export incentives. The table below highlights this aspect.

Table: Comparative GST/Tax regimes in apparel-exporting countries

Indeed the GST reforms have undeniably opened new opportunities for India’s apparel industry. The boost for affordable fashion and the textile value chain could help India strengthen its global trade position, while also catering to domestic consumption.

However, premium brands both Indian and global, face the challenge of sustaining demand in a higher tax environment.

Their survival strategy will depend on innovation in pricing, branding, and consumer engagement. As India aims to become a global textile powerhouse, the success of these reforms will ultimately hinge on whether the government can strike the right balance promoting affordability without suffocating aspiration.

LATEST FASHION NEWS