GST cuts fail to deliver the consumption boost for footwear, apparel sectors

Amit Aggarwal, CFO of Bata India Ltd, the country’s largest footwear retailer, said uncertainty around rate rationalization has led to delay in purchasing decisions. “There was a delay in purchases due to the planned rate rationalization,” he said, adding that the window from the announcement in mid-August to implementation on September 22 was “very, very long.”

Many channel partners have delayed purchases to avoid input tax credit (ITC) mismatches. “As soon as the interest rates were announced, we saw a delay in purchases,” Aggarwal said. Bata responded by reducing prices and launching incentive plans early. Despite the hit to gross margin, “we were the first movers to pass on GST-related benefits with effect from the first week of September,” he added. Without the cuts, Bata believes revenue would have remained “at least flat” rather than the reported 4% decline.

The shoe maker’s revenue fell 4.2% annually. ₹801.33 crore in the September quarter. Net profit also decreased ₹51.97 crore ₹13.89 crore.

GST on shoe cost ₹2,500 fell from 12% to 5% after the GST Council rationalized the slabs from four to two, 5% and 18%. The GST revision on ready-made garments simplified the rates into two brackets of 5% and 18% and raised the price threshold for the lower rate of 5%. ₹1,000 to ₹2,500, making budget and mass market clothes cheaper. However, clothes with high prices ₹2,500 now attract GST from 12% to 18%; This has impacted the mid-premium and festive wear categories.

Satish Meena, founder of market research firm Datum Intelligence, said, “GST has helped only in certain price ranges. The mid-premium segment, which prefers brands like Metro and Pantaloons, has benefited. But lower-priced shoes have not benefited because the demand itself, not the tax rate, is weak.” he said. “The difference is not just due to GST; it is fundamentally brand specific. Metro is doing well because it sells what consumers want today, while players like Bata are dealing with deeper relevance issues that go beyond tax changes.”

Footwear maker Khadim India Ltd’s September sales decline ₹101 crore in September quarter from ₹109 crore a year ago. Premium lines such as British Walkers showed double-digit growth and products were priced below ₹He got 500 rebounds, but the middle segment continued to struggle. The company said it expects the GST cut to gradually revive this category. “GST cut should bridge the gap between unorganized and organized sectors.”

Even V-Mart Retail said the benefits of the GST cut were not immediate in the lower ticket categories. Lalit Agarwal, managing director and CEO of the company, said: “We expected significant gains but the consumer response was not as strong as expected.”

Tata Group-owned retailer Trent Ltd also cited weak sentiment, unseasonal rains and the passage of GST as factors keeping growth in low single digits.

A Mirae Asset note on Trent said GST rationalization should support demand in small-ticket discretionary categories in the coming months, but warned that slower revenue growth despite a strong foundation last year pointed to a broader consumption slowdown.

Premium withdrawal

In comparison, premium shoe and clothing retailers Companies like Metro Brands and Aditya Birla Fashion & Retail Ltd (ABFRL) have reported that demand is stable and disruptions from the GST transition are limited.

Metro Brands CEO Nissan Joseph said consumers were deliberately waiting for the GST cut before making purchases, and with the new rates coming into effect, demand has accelerated meaningfully.

“We had prolonged monsoon rains during the quarter and our customers were waiting to make a big purchase for the GST benefits to take effect,” Joseph said. The impact of the disruption was immediate: “The GST changes have been very positive for our business. We have seen shoe prices cut by up to 11%.” ₹1,000 and ₹2,500 and about 6% for shoes below ₹1000.”

The GST cuts helped drive footfall and conversions, benefiting around 90% of Walkway and much of the Metro and Mochi portfolio. Joseph added that the broader consumption environment is normalizing. “We’ve gone through a lot of things where you can see a certain normality of things coming to light.”

Metro also reported strong growth in e-commerce and remains optimistic for the second half.

ABFRL, which operates Louis Philippe, Van Heusen, Pantaloons and a wide ethnic portfolio, has not witnessed the slowdown or GST-related delays that have affected other apparel companies.

“The overall demand environment remained largely in line with previous quarters as consumer sentiment remained cautious,” ABFRL managing director Ashish Dikshit said during the post-earnings call.

“The early start of Pujo served as a catalyst for apparel demand, leading to higher footfall and better conversions,” he said. “This 5-6% increase in GST does not meaningfully change consumer behavior… at these price points consumers are not moving towards value options.”

Pantaloons delivered comparable growth of 7% in the September quarter, with youth-focused brand OWND! It grew by 43% on an annual basis, signaling a stronger momentum than many of its peers. While rains in Kolkata and temporary closures in the Northeast briefly hurt foot traffic, parent company ABFRL said overall the festival season remained strong.

Karan Taurani, equity research analyst at Elara Capital, said September was particularly weak as consumers delayed purchases ahead of the implementation of GST. “Most of the spending has actually gone towards high-value products, where savings are much higher after GST,” he said, pointing to automobiles and white goods.

Taurani expects the benefit of GST cuts on clothing and footwear to materialize gradually.
“There will be a very small positive impact gradually over the next year or so.”

careful perspective

According to Ritu Srivastava, professor of economics at KJ Somaiya Institute of Management, the benefit of lower GST was offset by lower discounts. “The benefit from the GST cut was offset by the reduction in rebates,” he said, noting that the above items were: ₹Another 2,500 people did not receive any benefit because the high tax rates remained unchanged.

The spread of Durga Puja into the previous quarter and early Diwali led to fragmented spending. Retailers described this as a “summer Diwali” effect that undermined heavier festive attire.

Srivastava said e-commerce is reshaping shopping patterns. “Online marketplaces significantly influence timings and prices… consumers are buying well before the festival week.”

Heavy rains in the East and cyclonic activity in Tamil Nadu and Andhra Pradesh have further reduced foot traffic on major festive occasions. Retailers were forced to implement deeper discounts earlier in the season to clear stock and tighten margins.

While analysts expect some recovery in the third quarter, the outlook is cautious. Growth will be “somewhat better” but will be limited due to the intensity of competition and the relatively small share of wallet in fashion categories, Taurani said. “We’re not seeing a huge increase in growth and demand.”