India’s ethnic and festive wear segment witnessed a 15% decline in sales during the recent festival season, as higher Goods and Services Tax (GST) rates on garments priced above Rs. 2,500 (US $ 28) weighed on consumer demand.
According to Rahul Mehta, chief mentor of the Clothing Manufacturers Association of India (CMAI), sales of ethnic and festive wear dropped by around 15% compared with last year’s season. He noted that branded garments priced above Rs. 2,500 (US $ 28) saw a 5–7% fall in sales, whereas products priced below Rs. 2,500 (US $ 28) recorded a 7–8% growth over the previous Diwali period.
Branded Indian garments are typically priced between Rs. 2,500 (US $ 28) and Rs. 7,000 (US $ 79.53), while international brands are costlier but tend to have stable demand. Mehta stated that the segment most affected by the higher 18% GST rate is Indian ethnic wear, which forms a significant portion of the domestic apparel market. India’s apparel industry is valued at around US $ 100 billion, with ethnic wear accounting for nearly a quarter of this figure.
He added that demand for ethnic wear also peaks during the wedding season, which further underscores the impact of the increased tax burden. Previously, branded garments priced above Rs. 1,000 (US $ 11.51) attracted a 12% GST. However, the government revised the structure, moving all readymade garments priced above Rs. 2,500 (US $ 28) into the 18% slab — a rate generally reserved for luxury goods.
This has created pricing anomalies in the sector. While a saree worth Rs. 1 lakh attracts only 5% GST as it falls under textiles, a salwar set priced just above Rs. 2,500 (US $ 28) incurs 18% GST as it is categorised as a ready-made garment. Mehta said the change is expected to shift consumer preference towards products priced below Rs. 2,500 (US $ 28).
He also pointed out that earlier, manmade fibre (MMF) attracted 18% GST, MMF yarn was taxed at 12%, and garments at 5%. Now, all MMF products fall under the 5% slab, with only garments priced above Rs. 2,500 (US $ 28) attracting 18%. The CMAI has been advocating for a uniform 5% GST rate across all garment categories to promote consistency and affordability.
Mehta added that the association has completed a comprehensive study on the Indian apparel market, covering various segments, and the findings will be released in the coming weeks.
Meanwhile, a report by the Confederation of All India Traders Research and Trade Development Society revealed that ready-made garments accounted for 7% of total retail trade by the non-corporate sector during this year’s Deepavali, while textiles and fabrics contributed 4%.
