Higher GST dampens sale of ethnic wear during Deepavali

With readymade garments priced above ₹2,500 attracting 18% GST, ethnic and festive wear are said to have seen a 15% drop in sales during the festival season.

“Our estimate is ethnic wear and festive wear showed a decline of 15%. Sale of branded garments priced above ₹2,500 saw a 5-7% drop. However, products below ₹2,500 saw a growth of 7-8% over last Diwali,” said Rahul Mehta, chief mentor of the Clothing Manufacturers Association of India (CMAI).

Branded Indian garments are typically priced between ₹2,500 and ₹7,000 each. International brands are priced higher, but the demand for these is almost fixed.

The segment that is hit badly because of higher GST is the Indian ethnic wear.

The size of the domestic apparel market is estimated to be about $100 billion. Of this, ethnic wear constitutes almost 25%.

Apart from the festival season, the demand for ethnic wear is high during the wedding season too, Mr. Mehta said.

Branded garments priced above ₹1,000 attracted 12% GST earlier.

While the industry sought a uniform 5% duty, the government, instead, pushed all garments priced above ₹2,500 to the 18% slab, which is mainly for luxury goods.

While a saree priced ₹1 lakh will attract only 5% duty because it is classified under textiles, a salwar set priced more than ₹2,500 will come under 18% duty as it is a ready-made garment.

“There will be a certain shift to garments less than ₹2,500,” Mr. Mehta said.

Earlier, manmade fibre attracted 18% GST, MMF yarn was under 12% and garments under 5%.

Now, all MMF products are in the 5% GST slab. In the textile value chain, only garments more than ₹2,500 are in the 18% slab.

The association has been urging for a uniform 5% levy for all garments.

The CMAI has done a detailed study on the Indian apparel market, covering all segments, and the report will be released in 10-15 days, he added.

A report by the Confederation of All India Traders Research and Trade Development Society said that of the total retail trade by the non-corporate sector during Deepavali this year, ready-made garments constituted 7% and textiles and fabrics were 4%.