The Great Indian Price Reset: Fashion becomes affordable again riding on new GST reforms
27 October 2025, Mumbai
India’s organized apparel retail sector is entering a new era. What was once a fragmented pricing ecosystem riddled with tax distortions is now finding balance and momentum under the Goods and Services Tax (GST) rationalization. The reform, rolled out in the September quarter, has not only corrected a long-standing structural anomaly in the textile value chain but is also reshaping consumer behavior across income segments.
As per Crisil Ratings analysis covering 40 organized apparel retailers, the overhaul will be a “demand and margin catalyst” boosting sectoral growth by almost 13-14 per cent this fiscal year (FY26). The twin engines driving this growth: a sharp affordability boost for India’s middle class and a long-overdue correction of the inverted duty structure in textiles, particularly for man-made fibres (MMF).
New GST democratizing fashion affordability
The reform’s cornerstone is a two-tier GST structure for finished apparel that decisively tilts the scale in favor of the mass-market and mid-premium segments. Under the revised framework, garments priced up to Rs 2,500 are now uniformly taxed at 5 per cent, replacing the earlier dual rates 5 per cent (up to Rs 1,000) and 12 per cent (Rs 1,000-Rs 2,500). This simple yet powerful change directly targets the price-sensitive middle-class shopper, whose purchases make up nearly 65 per cent of all organized apparel sales.
Conversely, apparel priced above Rs 2,500 now faces a higher GST of 18 per cent, up from 12 per cent. While this could marginally temper high-end growth, analysts expect the volume rise in the mass segment to more than offset it. “Extending the 5 per cent GST slab to apparel priced up to Rs 2,500 boosts price competitiveness for the largest consumer base,” says Anuj Sethi, Senior Director, Crisil Ratings. “The timing, ahead of the festive and wedding seasons, will amplify the impact as middle-class spending accelerates.”
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