New Delhi: India’s recently unveiled Goods and Services Tax (GST) reform, aimed at simplifying taxation and promoting domestic consumption, is raising concerns among global fashion brands operating in the country. While the restructuring reduces the number of tax slabs from four to two 5% for essentials and 18% for most goods it introduces higher rates for luxury items, including certain clothing categories, creating potential setbacks for international apparel companies.
Under the new system, garments priced below ₹2,500 ($29) will attract 5% GST, whereas premium apparel above this threshold will face 18% tax. The change impacts brands like Zara, Levi Strauss, Nike, H&M, Lacoste, and Superdry, which largely target India’s aspirational middle class. Analysts warn that the higher tax on premium clothing could reduce consumer demand in a segment that contributes around 18% of India’s $70 billion apparel market.
Industry stakeholders have expressed concern over the financial implications of the policy. The Clothing Manufacturers Association of India has described the tax increase as a “death knell” for premium apparel sales, highlighting that many products previously more affordable will now become costlier. Executives from foreign fashion brands note that retail margins are already slim and operational costs, such as high rents, leave little room to absorb price increases, potentially slowing growth.
The GST reform also introduces a 40% tax on luxury and “sin” goods, as part of the government’s initiative to make everyday items more affordable for ordinary consumers. However, experts caution that global brands must adapt quickly, balancing pricing strategies and market positioning to sustain sales and remain competitive in India’s rapidly evolving fashion landscape.
As the new tax regime comes into effect on September 22, the fashion industry will closely monitor consumer reactions and assess how these changes affect overall demand. While the reform promises simplification and transparency in taxation, it simultaneously presents challenges for international apparel brands seeking to expand their footprint in India’s lucrative but price-sensitive market.