#TaiyaarHoKarAaiye? Boutique Owners Fear Dent In Indian Festive Wear Market Amid Higher GST

Nirali, in charge of brand management for a mid-level designer label based in Mumbai, is currently in the process of repricing and retagging her entire festive season inventory post the change in GST slabs. Her company sells clothes costing over Rs 2,500, which will now be taxed at 18%, compared with 12% earlier.

Some brands, like the one Nirali works for, have decided to pass on the entire hike to the end customer. They believe that the brand's target audience are too well-heeled to mind footing the additional price.

However, her calls to other multi-designer boutiques in the city revealed that other designers are still contemplating whether to go down that path.

Given that the year has been largely lacklustre, those brands who want to push sales in the festive season may eat the higher cost, given the high margins the category enjoys, she quipped.

Meanwhile, Nirali's strategy is to increase the discount period or go on sale more often, if need be. While fabrics are likely to see some rate rationalisation, embroidery and overheads form the bulk of costs for traditional wear, she explained.

Last week, the GST Council approved the most comprehensive overhaul of India’s consumption tax system since its introduction in 2017. Apart from hiking the rate for clothes worth over Rs 2,500, the GST Council has also raised the threshold of garments with 5% GST from Rs 1000 to Rs 2,500, making that segment more affordable.

The Rs 2,500-plus segment is the larger one. At a time when exporters are already grappling with the blow from US tariffs, such price led division with the industry does not bode well, said Rahul Mehta, chief mentor at the Clothing Manufacturers Association of India.

Mehta expects the change in slab to hit demand, especially for festive and wedding wear, given that the segment does tend to cost more. After all, who drives demand most for the mammoth industry? "The aspirational middle class," says Mehta, and a six percentage point hike in prices is not lost on them.

Kumar Rajagopalan, CEO of the Retailers Association of India, agreed that customers will be wary of the rising prices in the apparel and footwear segment.

However, Rajagopalan hopes that the savings on a host of other food products, white goods and cars, among others, will ensure that customers do not mind spending more on select categories and demand does not take a hit.

"It is important to remember that broadly, the 'GST 2.0' is a big positive," said Rajagopalan.