RAI opposes proposed GST rate hike on apparel, cosmetics

The Retailers Association of India (RAI) has expressed concerns over the proposed GST rate hike on apparel, handbags, cosmetics, watches, etc. According to the RAI, it can have "far-reaching" consequences on both the formal retail sector and consumer sentiment.

In a media statement, the RAI said that a steep GST hike could make formal businesses less competitive, pushing smaller players and traders towards parallel and unorganised markets.

Also, the proposed hike could impact Make in India's initiative as many international brands report that a significant portion of premium product purchases by Indian consumers occur outside the country.

Further, the retailers association said that the GST hike will impact women who are end-consumers of the products. "For many, particularly women managing household budgets, such increases can strain affordability and influence purchasing decisions, ultimately shaping market demand," according to RAI.

Additionally, the proposed GST hike could lead to significant business losses in the formal retail sector, directly affecting employment. According to RAI, the move may lead to a workforce reduction of approximately 10%, disrupting livelihood, as well as, hindering the growth and stability of the organised retail ecosystem.

The RAI said that increasing tax rates is counterproductive. It suggested that lowering rates and strengthening compliance mechanisms can expand the tax net more effectively without hurting consumer spending or sales.

“Increasing GST rates will hurt formal retail businesses and encourage unorganised markets to grow. This could undo the progress made in formalising businesses under the GST regime. To boost GST collections, the focus should be on lowering rates and improving compliance, not raising taxes that burden consumers and disrupt the retail sector," Kumar Rajagopalan, CEO of RAI said.