New Delhi: The GST rate on garments priced above Rs 2,500 per piece has been increased from 12% to 18%, a move that industry bodies warn will raise prices and affect middle-class affordability. The Retailers Association of India (RAI) and the Clothing Manufacturers Association of India (CMAI) welcomed the new two-slab GST structure and the removal of inverted duty structures across the textile value chain but expressed concerns over the impact on consumers.

The GST Council, in its recent meeting, approved the higher 18% GST for apparel, clothing accessories, and made-up textile articles exceeding Rs 2,500 in sale value per piece. Footwear above Rs 2,500 per pair will also continue to attract 18% GST, while items priced below this threshold have been reduced to 5%.

RAI cautioned that placing garments and footwear above Rs 2,500 in the higher GST slab could hurt middle-class buyers and weaken organised retail and the garment sector. The body suggested that ideally, all garments and footwear should be taxed at 5%, or a more reasonable price threshold should be established.

CMAI echoed similar concerns, highlighting that garments above Rs 2,500, including woollens, occasion wear, traditional Indian clothing, handlooms, and embroidered items produced by artisans and weavers, are widely consumed by the middle class. The association urged the GST Council to either place all garments at 5% or set a more realistic price limit to avoid disproportionate price hikes.

Despite concerns, both RAI and CMAI appreciated the removal of inverted duty structures and the cleaner two-slab GST framework, noting it simplifies taxation, enhances ease of doing business, and benefits retailers and MSMEs. CMAI also highlighted that the new system ensures fibre-neutral taxation, treating cotton and man-made fibres equally, thereby streamlining the entire value chain.