Mumbai: The recent rationalisation of the goods and services tax (GST) is expected to lift revenue growth for organised apparel retailers by around 200 basis points this fiscal, keeping overall growth steady at 13-14 per cent for the second consecutive financial year, a Crisil Ratings report said on Monday.

The GST rate cut on apparel priced below Rs 2,500 is likely to spur demand in the mid-premium segment, while the fast-fashion or value segment will continue to drive momentum, the report said.

Though limited, the GST relief provides timely support to sustain growth, it added.

The move to a uniform 5 per cent GST rate — replacing the previous dual structure of 5 per cent for items below Rs 1,000 and 12 per cent for those between Rs 1,000 and Rs 2,500 — has widened the consumption base, according to Crisil.

Conversely, the increase in GST on apparel priced above Rs 2,500 from 12 per cent to 18 per cent has impacted premium categories, including wedding wear, woollens, handlooms, and embroidered clothing. The premium segment accounts for roughly 35 per cent of organised apparel sales.

“Extending the 5 per cent GST slab to apparel priced up to Rs 2,500 boosts price competitiveness across the fast-fashion or value and mid-premium segments, whose customers are price-sensitive. With the timing of the GST rate cut coinciding with the festive season, demand should increase as middle-class spending picks up,” Crisil Ratings Senior Director Anuj Sethi said.

This development is notable, especially following six consecutive quarters of moderate growth, despite festive seasons and prolonged discounting to boost revenue, the report added. The effect is expected to be most visible among buyers in the Rs 2,500-Rs 3,500 range.

“Apparel retailers 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 per cent and 12 per cent to a uniform 5 per cent, will ease input costs,” Crisil Ratings Director Poonam Upadhyay said.

Overall, the GST revisions align with India’s evolving consumption patterns, driven by rising middle-class incomes, urbanisation, and a visible shift towards affordable, fashion-forward clothing, the report noted.