Lack of clarity on branded clothing makes retailers jittery about GST

No clarity on whether smaller players will be taxed at 18%, like multi-million dollar brands

Be ready to shell out more for that pair of designer jeans or branded t-shirt the next time you make a trip to your favourite branded store. With tax incidence on branded apparels and other finished textile products rising to 18 per cent under the new goods and services tax (GST) regime, prices would likely go up.

However with no clarity around which type of branded apparel would attract 18 per cent GST and what exactly is branded under the new tax regime, industry players are left scratching their heads.

"The impact would be significant as it is much more than what the business is currently bearing. It will surely make branded apparel expensive. While the definition of branded is not yet clear. I believe all branded apparel will become expensive irrespective of its origin home grown or foreign," said Sanjay Vakharia, COO Spykar Lifestyle Pvt Ltd.

According to market experts, the government needs to make it clear which specific brands they are planning to levy 18 per cent GST on. "A brand can be of a multi-million dollar design house or a small manufacturer who sells apparel made under his brand. If the government charges the same GST from a much smaller player, it would affect the small and medium enterprises involved in apparel making," said Praveen Khandelwal, secretary general, Confederation of All India Traders (CAIT).

"In current regime, excise duty of two per cent applies on readymade garments (with input credit restrictions) and on products having retail sale price of Rs 1000 and above, the effective duty rate is around 7.5 per cent with credit. In addition, sale of readymade garments attracts six per cent VAT thereby keeping effective tax costs at about 12.5 per cent-13 per cent. Basis media reports, under GST regime, it has been proposed that most articles of apparel and clothing would be taxed at 18 per cent irrespective of their retail sale price. Considering the overall GST regime, while the input credits influx may go up, it could still result in making branded garments bit more costlier for buyers irrespective of the segment they belong to," Krishan Arora, Partner, Grant Thornton India LLP.