GST Relief Likely for Apparel, Footwear Under ₹2,500 as Council Moves to Expand 5% Tax Slab

In a move aimed at making essential fashion and lifestyle items more affordable, the GST Council is set to bring apparel and footwear priced up to ₹2,500 under the 5% Goods and Services Tax (GST) slab, expanding the scope of lower tax rates for budget-conscious consumers.

The decision, reported by news agency PTI citing sources, was taken during the ongoing 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and attended by state finance ministers. The two-day meeting concludes today, September 4.

At present, only apparel and footwear priced up to ₹1,000 fall under the 5% GST category, with items above that threshold taxed at higher rates—typically 12% or 18%, depending on the product and material. The proposed reform could mark a significant shift in India’s indirect tax policy, potentially reducing retail prices for a wide segment of mass-market clothing and footwear.

The expansion of the 5% GST slab to include products priced up to ₹2,500 is expected to benefit both consumers and retailers, particularly those operating in the value and mid-premium segments. This change aligns with growing calls from industry stakeholders to ease the tax burden on everyday fashion items.

Retailers and brands catering to India’s Tier 2 and Tier 3 markets, where affordability remains key, are likely to gain from this move. It could also boost demand during upcoming festive and wedding seasons, traditionally high-sales periods for apparel and footwear.

“This is a positive move for the fashion retail ecosystem,” said a senior executive at a leading apparel brand. “By increasing the price ceiling under the 5% GST slab, the government is acknowledging inflationary pressures and changing consumer dynamics.”

Industry experts say the reform could encourage broader compliance and reduce pricing distortion, especially in the entry-level and value fashion categories. Retailers often struggle to balance pricing and profitability due to the sharp jump in tax rates beyond the ₹1,000 threshold.

If implemented, the change could drive higher volumes, particularly in the unorganised and semi-organised segments, and also narrow the price gap between formal and informal markets. It may also encourage more consumers to shift toward branded and GST-compliant products.