GST reforms to raise organised apparel revenues by 200 bps: Report

New Delhi, Oct 20 (IANS) India's organised apparel retail sector's revenue is expected to grow by around 200 basis points this fiscal year due to recent GST rationalisation, a report said on Monday.

The revenue from the organised apparel retail sector will thus maintain a growth rate of 13–14 per cent for the second consecutive fiscal year, according to a report from ratings firm Crisil Ratings.

The GST rate cut on apparel priced below Rs 2,500 is likely to lift demand in the mid-premium segment, while the fast fashion or value segment will continue to drive the momentum, Crisil's analysis of 40 organised retailers revealed.

The GST relief, though limited, provides timely support to sustain growth, the ratings firm said.

The uniform 5 per cent GST rate―versus the previous dual structure of 5 per cent below Rs 1,000 and 12 per cent between Rs 1,000 and Rs 2,500―has widened the consumption base, the report said.

"The increase in the GST rate on apparel priced above Rs 2,500 from 12 per cent to 18 per cent has weighed on premium categories, including wedding wear, woollens, handlooms and embroidered clothing," the firm noted.

The premium segment accounts for about 35 per cent of organised apparel sales.

Crisil said that since the fast-fashion/value and mid-premium apparel, mostly priced under Rs 2,500, make up nearly 65 per cent of the sector's revenue, stronger sales in these lower-priced items will likely balance out the slow growth in the higher-priced apparel segment.

“With the timing of the GST rate cut coinciding with the festive season, demand should increase as middle-class spending picks up," said Anuj Sethi, Senior Director, Crisil Ratings.

Moreover, benign inflation, easing food costs and faster fashion-refresh cycles will help retailers gain a modest share-of-wallet advantage in discretionary categories, leading to sustained sectoral revenue growth of 13-14 per cent this fiscal year, Sethi said.

Poonam Upadhyay, Director, Crisil Ratings, said that lower cotton prices and a reduction in GST on synthetic fibres and yarn to 5 per cent will ease input costs, which account for nearly two-thirds of production expenses.

--IANS

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