The next-generation GST reforms have provided much-needed relief to the Indian textile and garment industry by introducing a uniform 5 per cent tax rate. The reforms have also resolved the long-standing issue of an inverted duty structure for the textile value chain. However, they have simultaneously burdened expensive garments, including artisan-made ethnic wear, with higher taxes—disappointing a section of the industry.
Before GST restructuring, garments priced above ₹1,000 were taxed at 12 per cent, while those below that threshold attracted 5 per cent GST. The GST Council has now raised the price threshold to ₹2,500. Under the new system, garments priced up to ₹2,500 attract 5 per cent GST, while those priced above fall into the next slab of 18 per cent, as the 12 per cent slab was removed. This has effectively increased the tax rate on expensive garments. Branded apparel, premium winter wear like coats and suits, wedding attire, and traditional ethnic wear—often priced above ₹2,500—are now costlier for consumers.
Industry bodies have expressed concern over price-based GST slabs for garments. The Retailers Association of India (RAI) stated, “Price-based thresholds will create distortions and promote grey market activity. They will lead to misreporting, compliance challenges, and harm organised retail—especially mid- and premium-priced products.” RAI added that the new tax structure could discourage domestic manufacturing, undermine Make in India, and artificially force consumers to downgrade purchases rather than expand demand.
The higher 18 per cent tax rate on garments above ₹2,500 is expected to hurt middle-class affordability, weaken the organised retail sector, and impact categories like wedding apparel, winter wear, artisan-made products, festive clothing, and traditional weaves.
RAI said that all garments should ideally be taxed at 5 per cent, or at the very least, a more reasonable price threshold should be established.
The Clothing Manufacturers Association of India (CMAI), however, welcomed the increase in the price threshold for the 5 per cent tax rate, calling it a “positive move”. But it urged the GST Council to abolish price-based taxation altogether. All garments, irrespective of price, should be taxed at 5 per cent, or at least a more reasonable and realistic price level should be set, CMAI said.
It further noted that garments above ₹2,500 are also widely consumed by the middle class, including woollen clothing, occasion wear, Indian traditional clothing, handlooms, and embroidered artisan-made products. All these will now see a significant price rise due to the revised GST rate. CMAI strongly urged the GST Council and government to review this aspect.
