By
New Update
/connect-gujarat-english/media/media_files/2025/09/06/img_6424-2025-09-06-12-32-39.jpeg)
Follow Us
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 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%.
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.
The higher taxes are also a double whammy for domestic garment makers whose thriving U.S. 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 salesin 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".
In India, foreign premium brands have been luring affluent youngsters by adding retail outlets and e-commerce offerings.
Lululemon Athletica plans to enter the market in 2026.
The tax hikes will also apply to apparel from luxury goods makers Louis Vuitton , Dior and Versace.
Some customers may opt for cheaper more tax-efficient purchases while travelling abroad, but the hike to 18% from an earlier slab of 12% will have limited impact on India's rich, said one luxury industry executive.
Another area of expenditure set for a hit will be clothes bought for weddings. Lavish marriage celebrations are big business, and urban families can easily spend thousands of dollars on items from traditional sarees to men's jackets.
Latest Stories