GST rationalisation to boost organised apparel revenue by 200 bps in FY26: Crisil Ratings

The rating agency -- Crisil Ratings has indicated that the recent goods and services tax (GST) rationalisation is set to boost revenue growth of organised apparel retaile₹by around 200 bps this fiscal (FY26), keeping the topline steady at 13% to 14% for the second financial year in a row. It added that the GST rate cut on apparel priced below ₹2,500 is likely to lift demand in the mid-premium segment, while the fast fashion or value segment will continue to drive the momentum. It suggested that the GST relief provides timely support to sustain growth as the uniform 5% GST rate -- versus the previous dual structure of 5% below ₹1,000 and 12% between ₹1,000 and ₹2,500 -- has widened the consumption base.

In contrast, the increase in the GST rate on apparel priced above ₹2,500 from 12% to 18% has weighed on premium categories, including wedding wear, woollens, handlooms, and embroidered clothing. The premium segment accounts for about 35% of organised apparel sales. Meanwhile, it noted timing of the GST rate cut has coincided with the festive season, the demand should increase as middle-class spending picks up. It added that this development is notable, especially following six consecutive quarte₹of moderate growth, despite festive seasons and prolonged discounts to boost revenue. Besides, the impact will likely be most visible among buye₹in the ₹2,500-₹3,500 range.

It hinted that apparel retaile₹with a higher share of premium sales may choose to absorb part of the GST hike to sustain demand during the ongoing festive and wedding season, when buying activity is buoyant. However, lower cotton prices and the reduction of GST on synthetic fibres and yarn, from 18% and 12% to a uniform 5%, will ease input costs. Moreover, the GST revisions align with India's evolving consumption dynamics, which are driven by rising middle-class incomes, urbanisation, and a visible shift towards affordable, fashion-forward clothing.