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05-09-2025
Bureau Report
NEW DELHI: India’s overhaul of consumer tax stands to make everything from soaps to luxury SUVs cheaper but global fashion brands such as Zara, Levi Strauss, opens new tab and Lacoste have been spooked by higher levies on all apparel priced at more than $29.
The premium wear segment accounts for about 18% of an apparel industry worth $70 billion, says Datum Intelligence, spurred by a growing number of nouveau riche and brand-conscious youngsters in India.
The biggest tax reform in eight years by Prime Minister Narendra Modi’s government cuts levies to 5% on garments costing less than 2,500 rupees ($29) but items priced above that figure now face a higher levy of 18%.
That will pile pressure on the likes of PVH Corp, opens new tab, Marks and Spencer, opens new tab, Gap Inc , Under Armour, opens new tab, Nike, opens new tab, H&M, opens new tab and Japan’s Uniqlo, opens new tab.
Fashion companies worry about the impact of higher taxes on sales, since aspirational young people consider such purchases as a lifestyle upgrade but remain sensitive to price, said two Indian garment executives dealing in foreign brands.
“Retail works on wafer-thin margins and overheads like rents are extremely high,” said the chief executive of a foreign garment brand operating in India who sought anonymity for fear of government reprisal. “Growth that we were expecting earlier won’t come now.”
The official added, “This is not a luxury. The 2,500-rupee price point is basic now.”
The higher taxes are also a double whammy for domestic garment makers whose thriving US exports business is also reeling from President Donald Trump’s tariffs of 50%.
India’s reform has not only drastically cut consumption levies on daily essentials and consumer electronics but dealt a surprise win on Wednesday for pricey SUVs, reducing their tax rate to a flat 40%, versus up to 50% earlier.
Carmaker Mercedes-Benz has been reporting record sales in recent months, as consumption surges.
The higher rate on apparel could spell the “death knell for the industry”, the Clothing Manufacturers Association of India has said, as items costing more than 2,500 rupees are “consumed in large numbers by the common man and middle class”.
Most of the 875 new arrivals listed on Super-dry India’s website, for example, are subject to the new 18% tax, with many jackets on offer priced upwards of $170 and shirts at $60.
On the Lacoste India website, men’s T-shirts can cost as much as $99, with not one priced below $29, the new threshold for the higher tax, set to take effect on September 22.
In press statements, the Association has flagged worries about the impact of the higher tax adding to the fallout from Trump’s tariff salvo.
India’s Arvind Fashions, opens new tab for example, holds domestic franchisee rights for Tommy Hilfiger and Calvin Klein retail but its affiliate, Arvind Ltd, opens new tab; makes foreign brands for export to destinations including the United States, which has a share of roughly 30%.
The Arvind Group did not respond to a request for comment.
In India, foreign premium brands have been luring affluent youngsters by adding retail outlets and e-commerce offerings. Lululemon Athletica, opens new tab plans to enter the market in 2026.
