India’s apparel industry has entered a crucial transition phase this festive season, with the Goods and Services Tax (GST) revisions influencing buying patterns and reshaping pricing strategies across brands. While the increase to 18 per cent on garments priced above Rs 2,500 has softened premium sales momentum, the concurrent reduction to 5 per cent for products below this threshold has driven strong traction in the value and mid-premium segments.
According to CRISIL Ratings, organised apparel retail is projected to grow 13-14 per cent in FY25, powered by GST rationalisation and festive demand recovery. The revised tax slabs are expected to lift overall industry margins by around 200 basis points, as lower input costs for cotton, yarn, and synthetic fibres – now uniformly taxed at 5 per cent – improve profitability.
Mid-premium segment becomes the sweet spot
With consumers gravitating toward affordable yet stylish clothing, apparel brands are seeing a clear shift toward the Rs 1,500-Rs 2,499 price bracket.
Sidhant Keshwani, Founder & CEO of Libas, says the new tax structure has influenced consumer spending patterns but not overall enthusiasm for festive shopping.
“Customers are seeing good quality assortment below Rs 2,500. They’re buying smarter—more pieces that feel premium but still sit within the value segment. Brands that managed to absorb part of the GST transition instead of passing it on are clearly seeing an advantage.”
This focus on “affordable premium” fashion is visible across both online and offline channels. CRISIL’s analysis echoes the trend, estimating that nearly two-thirds of organised apparel revenues come from fast-fashion and mid-premium segments that now benefit from the lower 5 per cent GST rate.
Virgio bets on value, versatility, and longevity
For digital-first fashion platform Virgio, the GST reset has reinforced its positioning around versatile, sustainable fashion.
Amar Nagaram, Co-founder & CEO of Virgio, explains: “The 18 per cent GST on garments above Rs 2,500 has certainly softened momentum for premium and occasionwear. But the appetite for quality hasn’t vanished—it’s shifting toward smarter buying decisions like limited-edition drops and versatile pieces.”
He adds that consumers are now prioritising “cost-per-wear value” and sustainability over impulse festive spending.
“We’re seeing growing interest in the Rs 1,500-Rs 2,499 range, where products still feel premium but stay below the tax threshold. Our circular initiatives are also gaining traction as customers explore resale and second-life fashion to offset rising costs.”
Virgio has implemented a dynamic pricing strategy, with its AI-driven TESLA system forecasting demand to avoid overproduction and protect margins amid the changing tax environment.
Lifestyle India sees balanced growth across segments
While the mid-premium segment is thriving, the premium category has also held its ground, indicating that higher-income consumers remain relatively insulated from tax changes.
Devarajan Iyer, executive director and CEO of Lifestyle India, told ETRetail that the GST reform has had a largely positive impact on the company’s festive performance.
“Our festive buying period began around September 22, and we have seen very strong double-digit growth since then. The GST reduction on products up to Rs 2,500 has spurred consumption. On the premium side, a Rs 400-Rs 500 difference on a Rs 7,000 product doesn’t alter buying behaviour.”
Lifestyle India continues to invest in a tier-2 and tier-3 city expansion, with plans to open 10-14 new stores this fiscal.
“Nearly 60 per cent of our business still comes from metro markets, but the next wave of growth is clearly coming from emerging towns. We’re also seeing steady momentum in online sales, which currently contribute around 6 per cent but are targeted to reach 10 per cent over the next two years,” Iyer adds.
Lifestyle’s 90-95 per cent domestic sourcing and integrated supply chain have allowed it to navigate cost fluctuations efficiently, ensuring stability across product lines.
Spykar focuses on operational efficiency
Denim brand Spykar has also adjusted to the GST shift by rethinking its pricing and channel strategies to maintain velocity without compromising quality.
A Spykar spokesperson said the company is leveraging analytics to align assortments across its retail and online channels.
“The festive season has shown healthy demand recovery, especially in youth fashion. We’ve focused on optimising our supply chain and balancing price points to cater to both aspirational and value-conscious shoppers. Efficient sourcing and domestic production are helping us maintain profitability despite the GST changes.”
Industry-wide shift: Smart pricing, tier-2 growth, and digital agility
CRISIL’s latest release on organised apparel segment highlights that while the higher GST on premium apparel may temporarily temper growth in the top-tier segment, brands with balanced portfolios across price bands will continue to outperform.
The key differentiators, according to analysts, are – smart product architecture; wider channel mix; and operational agility.
With cotton and man-made fibres taxed uniformly, input costs have become more predictable, giving retailers better control over pricing and inventory management.
Festive demand signals strong momentum ahead
Industry executives agree that the festive season’s performance has validated the underlying strength of consumer sentiment. While shoppers are becoming more price-conscious, they are not shying away from purchases that combine design appeal, quality, and versatility.
The extended festive calendar, beginning late September and running through Diwali, has further boosted momentum. Retailers across categories report double-digit growth compared to last year, aided by early promotions, omnichannel strategies, and higher digital engagement.
The Outlook: Steady double-digit growth
CRISIL projects that the organised apparel sector’s margins will improve to 14-14.5 per cent in FY25 from about 14 per cent last year, driven by lower raw material costs and efficient inventory management.
The overall narrative, therefore, remains constructive: India’s apparel market is resetting, not slowing.
With a similar take on its growth, Lifestyle’s Iyer shared, “The GST reform has created more balance across categories. As we expand into new geographies and enhance digital presence, we are confident of sustaining double-digit growth over the next few years.”
