As the GST Council prepares to deliberate on recommendations from the Group of Ministers (GoM) on rate rationalization, the proposed hike in GST rates on readymade garments has stirred significant apprehension within the apparel industry. The proposal suggests a 5% GST on garments priced up to ₹1,500, 18% on those between ₹1,500 and ₹10,000, and a 28% rate for garments above ₹10,000.
Industry Voices Alarm
The Clothing Manufacturers Association of India (CMAI) and Retailers Association of India (RAI) have raised concerns about the potential impact of the rate hike. CMAI President Santosh Katariya emphasized the negative consequences, stating, “The proposed revisions could destabilize an already struggling industry, leading to closures of MSMEs, job losses, and a shift toward informal markets.”
He highlighted the disproportionate burden on the middle class, arguing that the tax structure should promote affordability. CMAI called for a uniform 5% GST rate, which, they argue, fosters stability across the value chain without reducing GST collections.
Rahul Mehta, Chief Mentor of CMAI, urged the government to consult with stakeholders before implementing changes, pointing out that “the industry requires supportive policies to address weakened consumer demand and other challenges."
Wider Implications
The apparel industry, employing millions across weaving, spinning, and garmenting sectors, predicts significant disruptions. CMAI warned of potential job losses, income reductions, and a decline in exports, with adverse effects on traditional sectors like handlooms and wool.
The RAI echoed these concerns, stating that the tax hike could strain consumer affordability and discretionary spending, particularly during festive and wedding seasons. CEO Kumar Rajagopalan noted, "Higher tax rates risk pushing premium purchases abroad while reducing domestic demand."
Both organizations have proposed lowering GST rates and enhancing compliance mechanisms to broaden the tax net without undermining consumer spending or formal retail.
Awaiting GST Council Decision
While the GoM’s recommendations aim to rationalize rates, the final decision rests with the GST Council, comprising representatives from the center and states. The council will deliberate on the economic implications and stakeholder inputs before deciding.
The apparel industry remains hopeful that the government will prioritize growth and affordability over rate hikes, aligning with its broader goals of ease of doing business and economic stability.
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