Apparel industry players have raised concerns about the increase of GST rate on garments priced above ₹2,500 from 12 per cent to 18 per cent.
The Clothing Manufacturers Association of India in a letter to the PM said this increase could prompt several players to go back to the informal sector. While the prices of such apparel products will rise, concerns have also been raised regarding the complexity of implementation.
A senior executive with a leading international brand said that apparel players operate on wafer thin margins and they would not be able to absorb the impact. “So, the impact will get passed on to consumers which will impact demand for clothes priced above ₹2,500. There are concerns that this will lead to the rise of the grey market with fakes and cheaper alternatives. Also, this will impact expansion plans of the organized brands,” he added.
The proposal to increase GST on garments priced above ₹2,500 to 18 per cent will directly impact middle-class consumers and organized apparel manufacturers. In the Indian wear segment, intricate embroidery, embellishments, and use of Indian made fabrics naturally take many garments above the ₹2,500 mark, making them mass-premium products rather than luxury items.
We congratulate the government on bringing most commonly used items at 5 per cent GST and request the same to be continued on apparel as well and have a uniform rate of 5 per cent across the board on apparel with no differentiation in pricing,” an industry expert said.
An tax expert, said this change may lead to price increases in premium and festive categories, prompting some consumers to shift toward mid-range options. But he added that premiumization is also gaining traction in urban markets. In its letter to the Prime Minister, the Clothing Manufacturers Association of India has also pointed out that the move will hit the common man’s consumption of quality apparel products.
Over several years, the government and industry bodies such as CMAI, have striven to bring the textile industry into the formal sector. Such high rates of GST will once again prompt several players to go back to the informal sector, as the gap between cash and official transactions will be far too tempting,” said, Chief Mentor, CMAI stated.
News Courtesy: A2ztaxcorp