India's apparel and footwear retailers were expecting a sharp consumption revival following the GST rate cuts announced in mid-August. Instead, the sector witnessed one of its most muted festive seasons in recent years, weighed down by an early Diwali, weak discretionary spending and erratic monsoon patterns.
Despite the Goods and Services Tax rationalisation aimed at making mass-market clothing and affordable footwear cheaper, most retailers reported subdued growth or even a decline in sales during the September quarter.
GST Uncertainty Led to Delayed Buying
The uncertainty around the GST transition significantly impacted consumer behaviour and retailer operations, said the CFO of Bata India Ltd, the country's largest listed footwear company.
"There was a delay in buying because of the planned rate rationalisation," he said, adding that the long transition window from the announcement in August to the implementation on September 22 discouraged purchases.
Many channel partners postponed orders to avoid input tax credit (ITC) mismatches. Bata responded by cutting prices early, passing on GST benefits from the first week of September and offering incentive schemes. Still, the company's revenue fell 4.2% year-on-year to Rs 801.33 crore, while net profit declined sharply to Rs 13.89 crore from Rs 51.97 crore a year earlier.
Rate Cuts Helped on Paper, Not in Practice
The GST rationalisation brought footwear below Rs 2,500 under a 5% slab (down from 12%) and simplified apparel taxes to 5% and 18%, raising the lower slab's threshold from Rs 1,000 to Rs 2,500.
While this theoretically made lower-priced products more affordable, demand in mass-market categories stayed weak.
A retail sector expert noted:"The divergence isn't because of GST alone. It's fundamentally brand-specific. Metro is doing well because it sells what consumers want today, while players like Bata are dealing with deeper relevance issues."
Khadim India saw its September quarter revenue drop to Rs 101 crore from Rs 109 crore last year. Although premium products and sub-Rs 500 lines saw traction, the mid-segment continued to underperform. The company expects GST cuts to gradually close the price gap with unorganised players.
Even V-Mart Retail said GST benefits failed to reflect immediately in lower-ticket fashion products. "We expected significant gains, but the consumer response was not as strong as anticipated," said CEO Lalit Agarwal.
Trent Ltd, the Tata-owned retailer, also cited muted sentiment, unseasonable rains and GST-linked disruptions for its low single-digit growth.
Premium Brands Outperformed as Shoppers Waited for GST Rollout
In sharp contrast, premium players such as Metro Brands and Aditya Birla Fashion and Retail Ltd (ABFRL) saw much smoother demand trends.
Metro's CEO said customers intentionally waited for the rate cut before shopping, and footfalls surged immediately after September 22."The GST changes have been very positive for our business," he said, noting price drops of 11% in the Rs 1,000-Rs 2,500 segment.
Nearly 90% of Walkway and a significant share of Metro and Mochi products benefited from the new slabs.
ABFRL-owner of Louis Philippe, Van Heusen, Pantaloons and several ethnic brands-reported steady momentum without the disruptions seen by peers. Pantaloons posted 7% like-to-like growth, while youth brand OWND! surged 43% year-on-year.
Festive Season Hit by Early Diwali, Weather Volatility, and E-Commerce Trends
Analysts said spending patterns were fragmented this year due to the early arrival of Durga Puja and Diwali, rainfall disruptions across eastern and southern India, and deep discounting by online marketplaces.
"Consumers are buying well before the festival week," a retail expert noted, adding that the GST cut benefits were often offset by reduced discounts in stores.
Retailers said heavy rains and cyclonic warnings across multiple states further dragged down footfall, forcing early markdowns and pressuring margins.
Outlook: Gradual Recovery Expected, But No Major Upswing
Analysts expect the GST cut to act as a slow-burn positive, with benefits materialising over the next 6-12 months rather than immediately.
While the third quarter may see some improvement, experts remain cautious."We don't see a big spurt in growth. Demand will improve mildly but remain constrained by low discretionary spending and high competition," one analyst said.
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