Apparel and footwear brands in India are preparing to pass on the full benefit of the Goods and Services Tax (GST) reduction on products priced below Rs. 2,500 (US $ 28) to consumers, while also scaling back the additional discounts funded from their own margins, according to industry executives.
The GST rate on this category has been reduced from 12% to 5%, effective Monday 22nd September. Executives said the resulting price drop is expected to spur demand, ease unsold inventory levels and allow companies to temper discounting practices that had become widespread during a prolonged period of weak consumer sentiment.
Lifestyle International chief executive Devarajan Iyer confirmed that the retailer would pass on the entire benefit of the 7 percentage point reduction. He noted that the company would complete updating all price tags by Sunday, after which the level of discounts offered would be lowered accordingly.
Woodland managing director Harkirat Singh said the tax cut would help boost sales and reduce excess stock, which in turn would limit the need for heavy discounting in the sub-Rs. 2,500 (US $ 28) range. He observed that this segment contributes around 15% of Woodland’s sales, adding that the reduction would be “a big benefit as market sentiments are not good”.
Industry observers noted the varied impact of the revised tax structure. While products up to Rs. 2,500 (US $ 28) will now be taxed at 5%, those priced above this threshold will attract 18% GST, up from 12%. This is expected to increase prices in the higher segment.
Iyer pointed out that global brands such as Levi’s and Puma, with price points spanning Rs. 799 (US $ 9) to over Rs. 5,000 (US $ 57), may see a shift in their sales mix, with the share of products under Rs. 2,500 (US $ 28) rising from 25–30% to as much as 40–50%.
Rahul Mehta, chief mentor at the Clothing Manufacturers’ Association of India, observed that discounting would likely be reduced in the Rs. 1,000–Rs. 2,500 (US $ 11 – US $ 28) category, as the tax benefit itself would bring prices down. However, he cautioned that products above Rs. 2,500 (US $ 28) would see a price increase.
A report by Motilal Oswal Financial Services dated 16th September suggested that retailers expect a strong recovery in sales between late September and December, driven by GST cuts, festivals and the wedding season. The report projected mid- to high-single digit like-for-like growth in branded apparel, though it noted that the retail environment remained muted during July and August.
Punit Bhardwaj, managing director at Iconic Creations, said footwear would now be on par with apparel due to the GST cut. He suggested that instead of further discounts, the change was likely to bring about more realistic maximum retail prices for products priced below Rs. 2,500 (US $ 28).
