Written by The Banking Post
India’s sweeping consumer tax reform has unsettled global fashion retailers, with brands such as Zara, Levi Strauss, Lacoste and H&M warning of slower sales as apparel above $29 now attracts a steep 18 percent levy.
The new tax regime, effective September 22, slashes levies on garments below 2,500 rupees ($29) to 5 percent, but raises them from 12 percent to 18 percent on higher-priced items—a move industry groups say could choke growth in the $70 billion apparel market.
“Retail works on wafer-thin margins, and overheads like rents are extremely high,” said the head of a foreign garment brand in India, requesting anonymity. “Growth that we were expecting earlier won’t come now. This is not luxury—the 2,500-rupee price point is basic now.”
The premium wear segment accounts for 18 percent of the industry, driven by affluent youth and aspirational middle-class consumers. With most Superdry jackets priced above $170 and Lacoste T-shirts selling at $99, nearly all global premium brands will be caught in the higher slab.
Domestic manufacturers fear a double blow as well, already reeling from US tariffs of up to 50 percent. “Putting these clothes in the 18 percent slab will result in parents compelled to make inferior clothing for their favourite child on their favourite day,” the Clothing Manufacturers Association of India said, noting that wedding spending will take a hit.
Meanwhile, the tax overhaul has delivered relief in other sectors—cutting rates on daily essentials, consumer electronics, and even reducing levies on luxury SUVs to 40 percent. Carmakers like Mercedes-Benz are reporting record sales on the back of booming consumption.
But fashion brands caution that the higher tax on apparel could act as a “death knell” for an industry that relies on aspirational buyers who remain highly price-sensitive.
