GST on Apparel and Footwear Businesses After Slab Change 2026 \u2014 Rates, Pricing Impact, ITC and Compliance Guide<\/p>\n
Introduction<\/p>\n
The apparel and footwear industry is one of India’s largest consumer-facing sectors, covering manufacturers, wholesalers, distributors, retailers, e-commerce sellers, job workers and importers.<\/p>\n
GST rate rationalisation introduced in September 2025 brought significant changes to this sector. The most important change was the expansion of the lower GST slab for eligible readymade garments from \u20b91,000 to \u20b92,500 per piece. Eligible apparel up to \u20b92,500 per piece now attracts 5% GST, while apparel above \u20b92,500 per piece attracts 18% GST. Similarly, footwear priced up to \u20b92,500 per pair attracts 5% GST, while footwear above \u20b92,500 per pair attracts 18% GST.<\/p>\n
These changes became effective from 22 September 2025 and therefore directly affect pricing, invoicing, inventory valuation, ITC management and GST compliance during 2026.<\/p>\n
For apparel and footwear businesses, the change is not merely a tax-rate reduction. It can affect the entire commercial chain\u2014from manufacturer procurement and wholesale pricing to MRP, retail margins, e-commerce listings and customer billing.<\/p>\n
This article explains the revised GST structure, pricing impact, ITC implications, old-stock treatment, invoicing requirements and practical compliance measures for apparel and footwear businesses in 2026.<\/p>\n
Before the rate rationalisation, the lower GST rate for specified apparel was available up to a much lower price threshold.<\/p>\n
The revised structure increased the threshold for eligible readymade garments to:<\/p>\n
\u20b92,500 per piece<\/p>\n
The government described the change as an expansion of the 5% slab from the earlier \u20b91,000 threshold.<\/p>\n
For footwear, the threshold was similarly increased to:<\/p>\n
\u20b92,500 per pair<\/p>\n
Footwear up to \u20b92,500 per pair is now covered at 5%, while footwear above \u20b92,500 per pair attracts 18%.<\/p>\n
The broad rate structure can be summarised as follows:<\/p>\n The exact HSN classification and product description should always be checked because not every textile or footwear-related product automatically falls into the same rate category.<\/p>\n The revised GST rates became effective from:<\/p>\n 22 September 2025<\/p>\n The GST Council’s recommendations provided that the revised rates for goods, other than specified tobacco products, would be implemented from 22 September 2025.<\/p>\n Therefore, for businesses operating in 2026, the revised rates are already part of the applicable GST framework.<\/p>\n This means businesses should not continue using the old \u20b91,000 threshold for eligible apparel.<\/p>\n The most important change for apparel businesses is the revised threshold.<\/p>\n Eligible articles of apparel and clothing accessories under Chapters 61 and 62 having a sale value:<\/p>\n Not exceeding \u20b92,500 per piece<\/p>\n are covered at:<\/p>\n 5% GST<\/p>\n Where the sale value:<\/p>\n Exceeds \u20b92,500 per piece<\/p>\n the applicable GST rate is:<\/p>\n 18%<\/p>\n The official GST rationalisation material specifically lists Chapters 61 and 62 and distinguishes products based on whether their sale value exceeds \u20b92,500 per piece.<\/p>\n For footwear under Chapter 64:<\/p>\n Footwear up to \u20b92,500 per pair<\/p>\n GST:<\/p>\n 5%<\/p>\n Footwear above \u20b92,500 per pair<\/p>\n GST:<\/p>\n 18%<\/p>\n The government specifically confirmed the reduction from 12% to 5% for footwear priced up to \u20b92,500 per pair.<\/p>\n The \u20b92,500 threshold creates an important pricing point.<\/p>\n For example, suppose a retailer sells an eligible garment at:<\/p>\n \u20b92,400<\/p>\n The product falls within the 5% GST category.<\/p>\n But if the applicable sale value becomes:<\/p>\n \u20b92,600<\/p>\n the product may move into the 18% category.<\/p>\n Therefore, businesses operating around the \u20b92,500 price point need strong pricing and SKU-level GST controls.<\/p>\n A small change in selling price can potentially change the applicable GST rate.<\/p>\n The rate reduction can have different effects depending on whether the business follows:<\/p>\n Tax-inclusive pricing<\/p>\n or<\/p>\n Tax-exclusive pricing.<\/p>\n This distinction is extremely important.<\/p>\n Suppose the taxable value of an eligible garment is:<\/p>\n \u20b92,000<\/p>\n At 12% GST:<\/p>\n GST = \u20b9240<\/p>\n Customer invoice value:<\/p>\n \u20b92,240<\/p>\n At 5% GST:<\/p>\n GST = \u20b9100<\/p>\n Customer invoice value:<\/p>\n \u20b92,100<\/p>\n Difference:<\/p>\n \u20b9140<\/p>\n Therefore, if the business passes the entire tax reduction to the customer, the customer-facing price can reduce.<\/p>\n Suppose an apparel product has a tax-inclusive selling price of:<\/p>\n \u20b92,100<\/p>\n Under 5% GST:<\/p>\n Taxable value:<\/p>\n \u20b92,100 \u00f7 1.05<\/p>\n \u2248 \u20b92,000<\/p>\n GST:<\/p>\n \u2248 \u20b9100<\/p>\n The reduction in GST can therefore create room for:<\/p>\n Lower consumer price;<\/p>\n Higher retailer margin;<\/p>\n Higher distributor margin;<\/p>\n Promotional discounts;<\/p>\n Better price competitiveness.<\/p>\n The business needs to decide commercially how much of the tax benefit should be passed to the consumer.<\/p>\n Suppose a pair of eligible footwear has a taxable value of:<\/p>\n \u20b92,000<\/p>\n At 12% GST:<\/p>\n GST = \u20b9240<\/p>\n Total = \u20b92,240<\/p>\n At 5% GST:<\/p>\n GST = \u20b9100<\/p>\n Total = \u20b92,100<\/p>\n Potential reduction:<\/p>\n \u20b9140<\/p>\n Again, the actual consumer price depends on whether the seller passes the entire tax reduction through.<\/p>\n This is a common misconception.<\/p>\n Suppose GST falls from 12% to 5%.<\/p>\n The difference is:<\/p>\n 7 percentage points<\/p>\n But this does not automatically mean the seller’s profit increases by 7%.<\/p>\n Why?<\/p>\n Because GST is generally collected from the customer and paid to the government after adjustment of eligible ITC.<\/p>\n The actual business impact depends on:<\/p>\n Purchase GST;<\/p>\n Output GST;<\/p>\n ITC eligibility;<\/p>\n Purchase price;<\/p>\n Selling price;<\/p>\n Discount;<\/p>\n MRP;<\/p>\n Distributor margin;<\/p>\n Retail margin;<\/p>\n Commercial agreements.<\/p>\n Therefore, businesses should calculate the net tax and margin impact, rather than simply treating the rate reduction as profit.<\/p>\n Retailers can benefit from the lower rate through:<\/p>\n Option 1 \u2014 Reduce consumer price<\/p>\n Pass the benefit directly to customers.<\/p>\n Option 2 \u2014 Maintain price<\/p>\n Maintain the existing customer price and potentially improve the pre-tax margin, subject to applicable pricing and anti-profiteering considerations.<\/p>\n Option 3 \u2014 Combination<\/p>\n Reduce price partially while retaining part of the benefit to strengthen margins.<\/p>\n The correct commercial strategy depends on competition, inventory cost and customer demand.<\/p>\n Manufacturers may benefit from reduced GST on certain inputs as well.<\/p>\n The 2025 GST rationalisation also reduced GST on man-made fibres from 18% to 5% and man-made yarns from 12% to 5%, helping address the inverted duty structure in the textile value chain.<\/p>\n This is particularly important for manufacturers producing:<\/p>\n Polyester garments;<\/p>\n Synthetic apparel;<\/p>\n MMF-based clothing;<\/p>\n Blended products;<\/p>\n Other eligible textile products.<\/p>\n The reduction in input GST can improve working-capital efficiency where earlier input tax rates were higher than output tax rates.<\/p>\n An inverted duty structure arises when:<\/p>\n GST on inputs > GST on output<\/p>\n This can result in accumulation of ITC.<\/p>\n The GST rationalisation of MMF fibres and yarns was intended partly to correct this structural issue. Government material states that the reductions align fibre, yarn and fabric rates and reduce working-capital burdens.<\/p>\n Therefore, apparel manufacturers should reassess their ITC position after the rate changes.<\/p>\n One of the most important compliance questions is:<\/p>\n What happens to existing ITC when the output GST rate is reduced?<\/p>\n The government’s FAQ clarified that ITC already validly availed in the electronic credit ledger can continue to be used for discharge of output tax liability under Section 49(4), subject to the law.<\/p>\n Therefore, a rate reduction does not automatically mean that all existing ITC becomes unusable.<\/p>\n However, businesses must separately examine cases where supplies become exempt.<\/p>\n This is different from a rate reduction.<\/p>\n If a product changes from:<\/p>\n Taxable \u2192 Exempt<\/p>\n ITC implications can arise under the applicable reversal provisions.<\/p>\n The government FAQ specifically clarifies that where an outward supply becomes exempt under the new rate schedule, ITC relating to supplies after the rate change may need to be reversed as per the CGST Act and Rules.<\/p>\n Therefore:<\/p>\n 5% vs 12%<\/p>\n is not the same as:<\/p>\n Taxable vs Exempt.<\/p>\n This distinction is very important for inventory and ITC accounting.<\/p>\n Apparel and footwear businesses often have significant inventory.<\/p>\n When the GST rate changes, businesses may still have stock purchased under the old tax rate.<\/p>\n For example:<\/p>\n A retailer purchased a garment when the applicable GST was 12%.<\/p>\n The product is later sold under the revised 5% rate.<\/p>\n The business should not simply assume that the old purchase GST must be reversed merely because the output rate has changed.<\/p>\n Validly availed ITC can continue to be used in accordance with the GST law.<\/p>\n However, the seller must charge the correct output GST rate applicable on the date and nature of the outward supply.<\/p>\n The GST rate change created a practical issue for manufacturers and importers because many products had already been manufactured and packed with old MRP declarations.<\/p>\n The Department of Consumer Affairs issued an advisory allowing certain compliance relaxations.<\/p>\n For unsold packages manufactured before 22 September 2025, manufacturers, packers and importers could voluntarily affix revised price stickers without obscuring the original MRP.<\/p>\n The government also permitted the use of old packaging material\/wrappers up to 31 March 2026 or until stock was exhausted, whichever was earlier, subject to the specified conditions.<\/p>\n Businesses should therefore distinguish between:<\/p>\n GST rate;<\/p>\n Taxable value;<\/p>\n MRP;<\/p>\n Discount;<\/p>\n Consumer selling price.<\/p>\n These are not necessarily the same thing.<\/p>\n Businesses should be careful with this terminology.<\/p>\n For the revised apparel and footwear entries, the government material uses:<\/p>\n sale value per piece for apparel; and<\/p>\n sale value per pair for footwear.<\/p>\n The official rate schedule specifically describes apparel above\/not exceeding \u20b92,500 based on sale value per piece and footwear based on sale value per pair.<\/p>\n Therefore, businesses should not automatically assume that the printed MRP alone determines the GST rate.<\/p>\n The exact transaction and valuation facts should be examined.<\/p>\n Suppose a garment has an MRP of:<\/p>\n \u20b92,700<\/p>\n and is sold after discount at:<\/p>\n \u20b92,400<\/p>\n The seller should not mechanically conclude that the product must attract 18% merely because the MRP is above \u20b92,500.<\/p>\n The GST rate determination must be based on the applicable tariff entry and the relevant valuation provisions.<\/p>\n This is why businesses selling near the \u20b92,500 threshold should maintain clear documentation of:<\/p>\n MRP;<\/p>\n List price;<\/p>\n Discount;<\/p>\n Transaction value;<\/p>\n Taxable value;<\/p>\n GST rate.<\/p>\n For high-volume businesses, the accounting system should be configured accordingly.<\/p>\n E-commerce sellers face additional challenges because product listings, tax rates and inventory systems must remain synchronized.<\/p>\n A seller should review:<\/p>\n SKU-wise GST rate;<\/p>\n HSN;<\/p>\n Product description;<\/p>\n Selling price;<\/p>\n Discount;<\/p>\n Tax-inclusive price;<\/p>\n Marketplace tax configuration;<\/p>\n Invoice generation;<\/p>\n TCS reconciliation, where applicable.<\/p>\n A wrong GST rate in the marketplace catalogue can result in incorrect tax collection across hundreds or thousands of transactions.<\/p>\n Suppose an online marketplace lists a garment at:<\/p>\n \u20b92,499<\/p>\n The seller must ensure that the applicable GST treatment corresponds to the actual product classification and relevant rate entry.<\/p>\n The business should not simply use:<\/p>\n “Under \u20b92,500 = always 5%”<\/p>\n without checking the HSN and product description.<\/p>\n This is especially important for:<\/p>\n Accessories;<\/p>\n Bags;<\/p>\n Fashion products;<\/p>\n Mixed textile products;<\/p>\n Special-purpose apparel;<\/p>\n Footwear accessories.<\/p>\n GST rate changes do not remove the importance of HSN classification.<\/p>\n The taxpayer should first determine:<\/p>\n What is the product?<\/p>\n Then:<\/p>\n Which HSN applies?<\/p>\n Then:<\/p>\n Which GST rate applies to that HSN and price category?<\/p>\n A wrong HSN can result in a wrong rate even when the business correctly understands the \u20b92,500 threshold.<\/p>\n The official rate rationalisation covers specified apparel under:<\/p>\n Chapter 61<\/p>\n Knitted or crocheted apparel and clothing accessories.<\/p>\n Chapter 62<\/p>\n Non-knitted\/non-crocheted apparel and clothing accessories.<\/p>\n The revised schedule distinguishes these products based on the \u20b92,500 per-piece threshold.<\/p>\n Therefore, businesses should map each SKU to the correct HSN rather than applying a blanket rate to the entire apparel business.<\/p>\n The reform also affects specified made-up textile articles.<\/p>\n Government material states that specified Chapter 63 made-ups up to \u20b92,500 per piece can fall within the 5% category, subject to the exclusions specified in the rate schedule.<\/p>\n Therefore, businesses dealing in:<\/p>\n Home textiles;<\/p>\n Certain textile sets;<\/p>\n Made-ups;<\/p>\n Other textile articles<\/p>\n should review their HSN-wise classification separately.<\/p>\n Footwear sellers should maintain SKU-level information on:<\/p>\n HSN;<\/p>\n Product description;<\/p>\n Pair value;<\/p>\n MRP;<\/p>\n Discount;<\/p>\n Taxable value;<\/p>\n GST rate.<\/p>\n A business selling footwear in both price categories should have separate tax configurations.<\/p>\n For example:<\/p>\n This demonstrates why the \u20b92,500 threshold is commercially important.<\/p>\n Retailers can create specific price bands:<\/p>\n Budget Segment<\/p>\n Up to \u20b91,000<\/p>\n Mass Market<\/p>\n \u20b91,001\u2013\u20b92,500<\/p>\n Premium<\/p>\n Above \u20b92,500<\/p>\n This can help businesses structure their pricing and GST configuration.<\/p>\n However, pricing decisions should be based on market conditions rather than artificially manipulating prices merely to obtain a lower tax rate.<\/p>\n Suppose a retailer’s product cost before GST is:<\/p>\n \u20b91,800<\/p>\n Assume desired margin:<\/p>\n \u20b9400<\/p>\n Taxable selling price:<\/p>\n \u20b92,200<\/p>\n At 5% GST:<\/p>\n GST = \u20b9110<\/p>\n Customer price:<\/p>\n \u20b92,310<\/p>\n If the same product were taxed at 12%:<\/p>\n GST = \u20b9264<\/p>\n Customer price:<\/p>\n \u20b92,464<\/p>\n Potential customer-facing difference:<\/p>\n \u20b9154<\/p>\n This illustrates how the lower GST rate can make products more competitive.<\/p>\n Cost:<\/p>\n \u20b91,900<\/p>\n Margin:<\/p>\n \u20b9400<\/p>\n Taxable value:<\/p>\n \u20b92,300<\/p>\n GST @ 5%:<\/p>\n \u20b9115<\/p>\n Final price:<\/p>\n \u20b92,415<\/p>\n If taxed at 12%:<\/p>\n \u20b9276 GST<\/p>\n Final price:<\/p>\n \u20b92,576<\/p>\n Difference:<\/p>\n \u20b9161<\/p>\n Again, whether the full difference reaches the consumer depends upon the seller’s pricing policy.<\/p>\n Wholesalers should review:<\/p>\n Dealer price;<\/p>\n Distributor margin;<\/p>\n Retailer margin;<\/p>\n GST rate;<\/p>\n Credit notes;<\/p>\n Debit notes;<\/p>\n Existing contracts;<\/p>\n Price lists.<\/p>\n If old price lists mention GST-inclusive prices, businesses should update them.<\/p>\n Credit notes require careful handling.<\/p>\n Suppose goods were supplied before the rate change and a subsequent adjustment is made.<\/p>\n The GST treatment depends on the nature and date of the original supply and the applicable provisions.<\/p>\n Businesses should not automatically apply the current GST rate to every credit note.<\/p>\n The original transaction should first be examined.<\/p>\n The same principle applies to debit notes.<\/p>\n For example, if the original supply occurred under the old rate and a subsequent price adjustment is required, the taxpayer should determine the applicable tax treatment based on the original transaction and relevant GST provisions.<\/p>\n The accounting system should preserve the original invoice reference.<\/p>\n Apparel and footwear businesses have high return rates, especially in e-commerce.<\/p>\n Businesses should establish clear GST processes for:<\/p>\n Returns;<\/p>\n Refunds;<\/p>\n Replacement;<\/p>\n Credit notes;<\/p>\n Tax adjustments.<\/p>\n The system should ensure that GST is not incorrectly refunded or charged when goods are exchanged.<\/p>\n Businesses should ideally create a rate-change inventory report showing:<\/p>\n Opening quantity;<\/p>\n Old-rate stock;<\/p>\n New purchases;<\/p>\n Sales;<\/p>\n Returns;<\/p>\n Closing quantity;<\/p>\n Input GST;<\/p>\n Output GST.<\/p>\n This becomes especially useful for businesses with thousands of SKUs.<\/p>\n The business should reconcile:<\/p>\n Purchase Register<\/p>\n with:<\/p>\n GSTR-2B<\/p>\n and:<\/p>\n Electronic Credit Ledger<\/p>\n The GST rate change does not remove the requirement to comply with normal ITC conditions.<\/p>\n Businesses should continue checking:<\/p>\n Valid tax invoice;<\/p>\n Supplier filing;<\/p>\n Receipt of goods\/services;<\/p>\n Business use;<\/p>\n Section 16 conditions;<\/p>\n Blocked credits under Section 17(5);<\/p>\n Reversal requirements.<\/p>\n Manufacturers can experience two major effects:<\/p>\n Output GST reduction<\/p>\n Eligible apparel may move from 12% to 5%.<\/p>\n Input GST rationalisation<\/p>\n Certain MMF inputs also moved to lower rates.<\/p>\n This can improve:<\/p>\n Working capital;<\/p>\n Cash flow;<\/p>\n Pricing flexibility;<\/p>\n Competitiveness;<\/p>\n Domestic demand.<\/p>\n Government material specifically states that MMF fibre and yarn rate reductions were intended to correct the inverted duty structure and reduce working-capital burdens.<\/p>\n Small retailers should not assume that GST compliance has become unnecessary because the rate is lower.<\/p>\n They still need to:<\/p>\n Maintain invoices;<\/p>\n Charge correct GST;<\/p>\n File returns;<\/p>\n Reconcile ITC;<\/p>\n Maintain HSN information;<\/p>\n Report turnover correctly.<\/p>\n The government clarified that the GST registration threshold itself was not changed merely because of the rate rationalisation.<\/p>\n This is an important point.<\/p>\n The reduction in GST rates should not be confused with a change in GST registration thresholds.<\/p>\n The official FAQ states that there was no change in the registration threshold for goods as part of the rate changes.<\/p>\n Therefore, businesses should separately determine whether registration is mandatory based on the applicable registration provisions.<\/p>\n Businesses under the composition scheme should separately evaluate whether the scheme is suitable based on their turnover, business model and applicable eligibility conditions.<\/p>\n A rate reduction in the regular scheme does not automatically mean that composition taxpayers should make the same pricing calculations as regular taxpayers.<\/p>\n The composition taxpayer’s tax structure and restrictions are different.<\/p>\n A proper GST invoice should contain, as applicable:<\/p>\n Supplier GSTIN;<\/p>\n Invoice number;<\/p>\n Invoice date;<\/p>\n Customer details;<\/p>\n HSN;<\/p>\n Product description;<\/p>\n Quantity;<\/p>\n Unit;<\/p>\n Taxable value;<\/p>\n GST rate;<\/p>\n CGST;<\/p>\n SGST\/UTGST or IGST;<\/p>\n Total invoice value.<\/p>\n For apparel and footwear, the HSN and price-category mapping should be correctly configured.<\/p>\n Businesses using:<\/p>\n Tally;<\/p>\n Busy;<\/p>\n Zoho Books;<\/p>\n ERP systems;<\/p>\n POS software;<\/p>\n E-commerce software<\/p>\n should update their tax masters.<\/p>\n For each SKU, review:<\/p>\n Product \u2192 HSN \u2192 GST Rate \u2192 Price Band<\/p>\n This is particularly important because a single business may sell products attracting both:<\/p>\n 5% GST<\/p>\n and<\/p>\n 18% GST<\/p>\n A useful internal structure can be:<\/p>\n Apparel \u2013 5%<\/p>\n Eligible apparel \u2264 \u20b92,500\/piece<\/p>\n Apparel \u2013 18%<\/p>\n Eligible apparel > \u20b92,500\/piece<\/p>\n Footwear \u2013 5%<\/p>\n Eligible footwear \u2264 \u20b92,500\/pair<\/p>\n Footwear \u2013 18%<\/p>\n Eligible footwear > \u20b92,500\/pair<\/p>\n But the exact classification should always be verified against the applicable HSN\/rate notification.<\/p>\n Mistake 1<\/p>\n Using the old \u20b91,000 threshold.<\/p>\n Mistake 2<\/p>\n Applying 5% to every garment regardless of HSN.<\/p>\n Mistake 3<\/p>\n Ignoring the per-piece condition.<\/p>\n Mistake 4<\/p>\n Confusing MRP with sale value.<\/p>\n Mistake 5<\/p>\n Failing to update POS software.<\/p>\n Mistake 6<\/p>\n Using incorrect HSN.<\/p>\n Mistake 7<\/p>\n Not reconciling old inventory.<\/p>\n Mistake 8<\/p>\n Ignoring credit\/debit note implications.<\/p>\n Mistake 9<\/p>\n Not checking ITC impact.<\/p>\n Mistake 10<\/p>\n Assuming lower GST automatically means 7% higher profit.<\/p>\n Mistake 1<\/p>\n Applying 5% to footwear above \u20b92,500.<\/p>\n Mistake 2<\/p>\n Using \u20b92,500 as MRP instead of analysing the relevant sale value.<\/p>\n Mistake 3<\/p>\n Ignoring HSN Chapter 64 classification.<\/p>\n Mistake 4<\/p>\n Wrong tax rate in e-commerce listings.<\/p>\n Mistake 5<\/p>\n Wrong rate in retail POS.<\/p>\n Mistake 6<\/p>\n Incorrect GST in credit notes.<\/p>\n Mistake 7<\/p>\n Failure to reconcile GST with accounting records.<\/p>\n Every apparel and footwear business should conduct a GST master review.<\/p>\n Step 1<\/p>\n Export all active SKUs.<\/p>\n Step 2<\/p>\n Map HSN codes.<\/p>\n Step 3<\/p>\n Identify products up to \u20b92,500.<\/p>\n Step 4<\/p>\n Identify products above \u20b92,500.<\/p>\n Step 5<\/p>\n Verify applicable GST rate.<\/p>\n Step 6<\/p>\n Update accounting software.<\/p>\n Step 7<\/p>\n Update POS.<\/p>\n Step 8<\/p>\n Update e-commerce listings.<\/p>\n Step 9<\/p>\n Update price lists.<\/p>\n Step 10<\/p>\n Review MRP\/packaging compliance.<\/p>\n Step 11<\/p>\n Reconcile ITC.<\/p>\n Step 12<\/p>\n Review margins.<\/p>\n Step 13<\/p>\n Reconcile GST returns.<\/p>\n Step 14<\/p>\n Document rate-change adjustments.<\/p>\n Businesses should not automatically reduce every price.<\/p>\n Instead, they should calculate:<\/p>\n Old tax-inclusive price<\/p>\n vs.<\/p>\n New tax-inclusive price<\/p>\n and then decide how much of the benefit should be passed to customers.<\/p>\n Three possible approaches are:<\/p>\n Strategy A \u2014 Full Pass-Through<\/p>\n Entire tax benefit goes to customers.<\/p>\n Best for:<\/p>\n Highly competitive retail;<\/p>\n Price-sensitive products;<\/p>\n Volume-focused businesses.<\/p>\n Strategy B \u2014 Partial Pass-Through<\/p>\n Some benefit goes to customer and some improves margin.<\/p>\n Best for:<\/p>\n Established brands;<\/p>\n Moderate competition;<\/p>\n Premium positioning.<\/p>\n Strategy C \u2014 Margin-Focused<\/p>\n Consumer price remains substantially unchanged.<\/p>\n Best only where market conditions permit and applicable legal requirements are satisfied.<\/p>\n The government expects lower GST on affordable apparel and footwear to improve affordability and support domestic consumption.<\/p>\n For apparel, the government specifically highlighted potential benefits for middle- and lower-income consumers, demand in Tier-2 and Tier-3 cities and rural markets.<\/p>\n For footwear, the government expects the reduction to improve affordability and support smaller footwear businesses.<\/p>\n The impact may be particularly relevant for:<\/p>\n Local garment shops;<\/p>\n Footwear retailers;<\/p>\n Wholesale markets;<\/p>\n Small manufacturers;<\/p>\n Regional brands.<\/p>\n Lower GST can provide businesses with greater flexibility to compete on price.<\/p>\n The government has specifically identified potential demand benefits in smaller cities and rural markets from the apparel rate change.<\/p>\n E-commerce businesses should expect increased importance of:<\/p>\n Automated tax mapping;<\/p>\n Product classification;<\/p>\n Discount handling;<\/p>\n Return management;<\/p>\n GST reconciliation.<\/p>\n A small tax configuration error multiplied across thousands of orders can create a significant GST mismatch.<\/p>\n Therefore, technology controls are essential.<\/p>\n Product Classification<\/p>\n HSN verified<\/p>\n Product description verified<\/p>\n Apparel\/footwear category confirmed<\/p>\n \u20b92,500 threshold checked<\/p>\n Per-piece\/per-pair treatment checked<\/p>\n Accounting<\/p>\n GST master updated<\/p>\n POS updated<\/p>\n ERP updated<\/p>\n E-commerce rates updated<\/p>\n Price list updated<\/p>\n ITC<\/p>\n Purchase invoices reconciled<\/p>\n GSTR-2B reconciled<\/p>\n Credit ledger reviewed<\/p>\n Reversal requirements checked<\/p>\n Sales<\/p>\n GST rate correct<\/p>\n HSN correct<\/p>\n Invoice correct<\/p>\n Credit notes reviewed<\/p>\n Debit notes reviewed<\/p>\n Returns reconciled<\/p>\n Pricing<\/p>\n MRP reviewed<\/p>\n Discount structure reviewed<\/p>\n Tax-inclusive price recalculated<\/p>\n Retail margin reviewed<\/p>\n Wholesale price reviewed<\/p>\n The official government material confirms the apparel, footwear and MMF changes.<\/p>\n The most important points for 2026 are:<\/p>\n Eligible apparel up to \u20b92,500 per piece attracts 5% GST.<\/p>\n Eligible apparel above \u20b92,500 per piece attracts 18%.<\/p>\n Footwear up to \u20b92,500 per pair attracts 5%.<\/p>\n Footwear above \u20b92,500 per pair attracts 18%.<\/p>\n The revised rates became effective from 22 September 2025.<\/p>\n HSN classification remains critical.<\/p>\n The \u20b92,500 threshold should not be confused blindly with MRP.<\/p>\n Existing validly availed ITC does not automatically become unusable merely because the output rate is reduced.<\/p>\n If a supply becomes exempt, ITC reversal provisions may apply.<\/p>\n GST registration thresholds were not changed merely because of these rate revisions.<\/p>\n POS, ERP and e-commerce tax masters should be updated.<\/p>\n Pricing should be recalculated based on tax-inclusive and tax-exclusive models.<\/p>\n Old inventory should be separately reviewed.<\/p>\n Apparel manufacturers using MMF inputs should reassess their input-tax and working-capital position.<\/p>\n Businesses should maintain proper documentation for discounts, returns, credit notes and rate changes.<\/p>\n Conclusion<\/p>\n The GST rationalisation of apparel and footwear has significantly changed the tax landscape for India’s retail and manufacturing sector.<\/p>\n The biggest consumer-facing change is the expansion of the lower GST rate to eligible apparel priced up to \u20b92,500 per piece and footwear priced up to \u20b92,500 per pair. The revised rates became effective from 22 September 2025, making them the applicable framework for businesses operating in 2026.<\/p>\n For businesses, however, the impact goes far beyond simply changing the GST percentage on invoices.<\/p>\n The rate change affects:<\/p>\n Product pricing;<\/p>\n Consumer prices;<\/p>\n Retail margins;<\/p>\n Wholesale pricing;<\/p>\n Inventory;<\/p>\n ITC;<\/p>\n MRP management;<\/p>\n E-commerce listings;<\/p>\n POS systems;<\/p>\n HSN classification;<\/p>\n Credit notes;<\/p>\n Returns;<\/p>\n GST reconciliation.<\/p>\n Businesses operating around the \u20b92,500 price point should be particularly careful because a change in product value can affect the applicable GST rate.<\/p>\n At the same time, manufacturers in the synthetic textile segment should review the benefit of lower GST rates on man-made fibres and yarns, which were reduced to 5% as part of the wider textile-sector rationalisation. The government has stated that these changes are intended to correct the inverted duty structure and improve working capital.<\/p>\n The right approach for 2026 is therefore not simply “change 12% to 5%”. Businesses should undertake a complete SKU-wise GST, pricing and ITC review.<\/p>\n A professional implementation should follow:<\/p>\n HSN Verification \u2192 Price-Band Analysis \u2192 GST Rate Mapping \u2192 ITC Review \u2192 Inventory Review \u2192 POS\/ERP Update \u2192 Price Revision \u2192 Invoice Testing \u2192 GST Return Reconciliation.<\/p>\n This approach can help apparel and footwear businesses capture the benefit of the revised GST structure while reducing the risk of incorrect tax charging, ITC mismatches and compliance issues.<\/p>\n","protected":false},"excerpt":{"rendered":" GST on Apparel and Footwear Businesses After Slab Change 2026 \u2014 Rates, Pricing Impact, ITC and Compliance Guide Introduction The apparel and footwear industry is one of India’s largest consumer-facing sectors, covering manufacturers, wholesalers, distributors, retailers, e-commerce sellers, job workers and importers. GST rate rationalisation introduced in September 2025 brought significant changes to this sector….<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[6],"tags":[739],"class_list":["post-1337","post","type-post","status-publish","format-standard","hentry","category-compliances","tag-gst-on-apparel"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1337","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=1337"}],"version-history":[{"count":2,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1337\/revisions"}],"predecessor-version":[{"id":1525,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1337\/revisions\/1525"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=1337"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=1337"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=1337"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n \nProduct<\/th>\n Applicable Value<\/th>\n GST Rate<\/th>\n<\/tr>\n<\/thead>\n \n Eligible apparel\/clothing<\/td>\n Up to \u20b92,500 per piece<\/td>\n 5%<\/td>\n<\/tr>\n \n Eligible apparel\/clothing<\/td>\n Above \u20b92,500 per piece<\/td>\n 18%<\/td>\n<\/tr>\n \n Footwear<\/td>\n Up to \u20b92,500 per pair<\/td>\n 5%<\/td>\n<\/tr>\n \n Footwear<\/td>\n Above \u20b92,500 per pair<\/td>\n 18%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n Effective Date of the GST Rate Change<\/h2>\n
Apparel GST \u2014 \u20b92,500 Threshold Explained<\/h2>\n
Footwear GST \u2014 \u20b92,500 Threshold Explained<\/h2>\n
Why the \u20b92,500 Threshold Matters for Businesses<\/h2>\n
Pricing Impact on Apparel Businesses<\/h2>\n
Example \u2014 Tax Exclusive Pricing<\/h2>\n
Example \u2014 Tax Inclusive MRP<\/h2>\n
Pricing Impact on Footwear<\/h2>\n
GST Reduction Does Not Automatically Mean 7% More Profit<\/h2>\n
Impact on Retailers<\/h2>\n
Impact on Manufacturers<\/h2>\n
Inverted Duty Structure and Apparel Businesses<\/h2>\n
ITC Impact After GST Rate Change<\/h2>\n
What if a Product Becomes Exempt?<\/h2>\n
Treatment of Old Stock<\/h2>\n
Old MRP Printed on Packaging<\/h2>\n
Does GST Rate Depend on MRP?<\/h2>\n
Discount and GST Rate<\/h2>\n
E-Commerce Apparel Sellers<\/h2>\n
Online Marketplace Pricing<\/h2>\n
HSN Classification Remains Important<\/h2>\n
Apparel Under Chapters 61 and 62<\/h2>\n
Made-Ups and Other Textile Products<\/h2>\n
Footwear Business \u2014 Key Compliance Points<\/h2>\n
\n\n
\n \nFootwear<\/th>\n GST<\/th>\n<\/tr>\n<\/thead>\n \n \u20b91,500 per pair<\/td>\n 5%<\/td>\n<\/tr>\n \n \u20b92,200 per pair<\/td>\n 5%<\/td>\n<\/tr>\n \n \u20b92,500 per pair<\/td>\n 5%<\/td>\n<\/tr>\n \n \u20b92,501 per pair<\/td>\n 18%<\/td>\n<\/tr>\n \n \u20b93,000 per pair<\/td>\n 18%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n Apparel Business \u2014 Price-Band Strategy<\/h2>\n
Pricing Example \u2014 Apparel<\/h2>\n
Pricing Example \u2014 Footwear<\/h2>\n
Impact on Wholesale Businesses<\/h2>\n
Credit Notes After Rate Change<\/h2>\n
Debit Notes After Rate Change<\/h2>\n
Returns and Exchanges<\/h2>\n
Inventory Accounting After the Rate Change<\/h2>\n
ITC Reconciliation<\/h2>\n
Pricing Impact on Manufacturers<\/h2>\n
Impact on Small Retailers<\/h2>\n
GST Registration Threshold Did Not Change<\/h2>\n
Composition Scheme Considerations<\/h2>\n
GST Invoice Format for Apparel and Footwear<\/h2>\n
GST Rate Mapping in Tally\/ERP<\/h2>\n
Practical GST Master Structure<\/h2>\n
Common Mistakes in Apparel GST<\/h2>\n
Common Mistakes in Footwear GST<\/h2>\n
Business Action Plan for 2026<\/h2>\n
GST Pricing Strategy \u2014 What Should Businesses Do?<\/h2>\n
Why the Change Can Increase Demand<\/h2>\n
Impact on Tier-2 and Tier-3 Markets<\/h2>\n
Impact on E-Commerce<\/h2>\n
Compliance Checklist for 2026<\/h2>\n
Quick Comparison \u2014 Before vs After GST Reform<\/h2>\n
\n\n
\n \nParticular<\/th>\n Earlier Structure<\/th>\n Revised Structure<\/th>\n<\/tr>\n<\/thead>\n \n Eligible apparel lower slab<\/td>\n Up to \u20b91,000\/piece<\/td>\n Up to \u20b92,500\/piece<\/td>\n<\/tr>\n \n Eligible apparel above threshold<\/td>\n 12%<\/td>\n 18%<\/td>\n<\/tr>\n \n Footwear lower slab<\/td>\n Up to \u20b92,500 now<\/td>\n 5%<\/td>\n<\/tr>\n \n Footwear above \u20b92,500<\/td>\n 18%<\/td>\n 18%<\/td>\n<\/tr>\n \n Effective date<\/td>\n \u2014<\/td>\n 22 Sept 2025<\/td>\n<\/tr>\n \n MMF fibres<\/td>\n 18%<\/td>\n 5%<\/td>\n<\/tr>\n \n MMF yarns<\/td>\n 12%<\/td>\n 5%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n Key Takeaways for Apparel & Footwear Businesses<\/h2>\n