Which HSN Codes in Apparel & Accessories Moved Slabs? A Brand Checklist
The September 2025 GST restructuring brought significant changes to apparel and accessories taxation in India. This comprehensive guide helps fashion brands understand which HSN codes moved to new tax slabs, their compliance implications, and strategic considerations for the future of Indian fashion commerce.
India's fashion and apparel industry witnessed a seismic shift on September 22, 2025, when the Government of India implemented the most comprehensive GST restructuring since 2017. The new GST 2.0 framework has fundamentally altered the taxation landscape for apparel and accessories, moving away from the complex multi-slab system to a simplified two-tier structure that significantly impacts how fashion brands price, market, and manage their product portfolios.
For fashion brands, retailers, and e-commerce businesses operating in India's $75 billion apparel market, understanding these HSN code changes isn't just about compliance—it's about strategic positioning in a rapidly evolving marketplace. The new structure creates distinct winners and losers, reshaping competitive dynamics across price segments while offering unprecedented opportunities for brands that adapt quickly.
The Great GST Restructuring: From Complexity to Clarity
The previous GST structure for apparel and accessories was notoriously complex, with multiple rate slabs creating confusion and compliance challenges. The old system taxed apparel at varying rates: 5% for items under ₹1,000, 12% for items between ₹1,000-₹2,500, and higher rates for premium products. This created artificial price points and forced brands into narrow pricing strategies.
The new GST 2.0 framework eliminates this complexity by introducing just two primary slabs for apparel and accessories: 5% for items up to ₹2,500 and 18% for items above ₹2,500. This seemingly simple change carries profound implications for brand strategy, inventory management, and consumer behavior across the fashion industry.
HSN Codes That Experienced Major Slab Movements
HSN Code 61: Knitted or Crocheted Apparel
Previous Structure: Mixed rates based on price thresholds New Structure: 5% up to ₹2,500 | 18% above ₹2,500
HSN Code 61 covers knitted and crocheted garments, including t-shirts, sweaters, knitwear, hosiery, and casual wear. This category represents one of the largest segments in Indian apparel, particularly for brands focusing on everyday wear and athleisure.
Impact Analysis:
- Budget brands (₹500-₹2,500 range) experience significant cost reductions
- Premium brands (above ₹2,500) face increased tax burden
- Mid-tier brands around the ₹2,500 threshold face critical pricing decisions
HSN Code 62: Non-Knitted Apparel and Clothing Accessories
Previous Structure: Graduated rates with complex thresholds New Structure: 5% up to ₹2,500 | 18% above ₹2,500
This extensive category encompasses formal wear, traditional clothing, jackets, trousers, shirts, dresses, and various clothing accessories. HSN 62 represents the backbone of India's formal and ethnic wear markets.
Strategic Implications:
- Ethnic wear brands benefit significantly due to traditional pricing in the ₹1,500-₹2,500 range
- Formal wear brands face mixed outcomes based on their positioning
- Accessories manufacturers need to reassess product bundling strategies
HSN Code 64: Footwear
Previous Structure: 18% across most categories New Structure: 5% up to ₹2,500 | 18% above ₹2,500
The footwear segment experienced one of the most dramatic transformations, with the vast majority of Indian footwear now qualifying for the lower 5% rate.
Market Disruption Potential:
- Mass market footwear brands gain substantial competitive advantage
- Premium footwear faces unchanged tax burden
- Athletic and sports footwear brands need category-specific strategies
Industry-Wide Impact: Winners, Losers, and Strategic Repositioning
The Clear Winners
Budget and Mid-Tier Brands: Companies positioning products in the ₹1,500-₹2,500 range benefit from reduced tax burden, enabling them to either improve margins or pass savings to consumers. Brands like Max Fashion, Reliance Trends, and numerous ethnic wear manufacturers find themselves in advantageous positions.
E-commerce Platforms: Online marketplaces benefit from simplified tax structures, reduced compliance complexity, and the ability to offer more competitive pricing on mass-market products. This is particularly relevant for platforms focusing on affordable fashion segments.
The Challenge Facing Premium Brands
Global Fashion Giants: International brands like Zara, H&M, Nike, and Adidas face increased tax burden on their premium product lines. According to recent industry reports, brands with average selling prices above ₹2,500 may see margin compression of 3-6%.
Luxury Segment Impact: High-end fashion brands already operating in the luxury space face minimal direct impact, as their pricing strategies were never dependent on GST optimization. However, the widening gap between mass and premium segments may affect brand positioning strategies.
Strategic Compliance and Operational Considerations
Pricing Strategy Realignment
Fashion brands must now navigate the critical ₹2,500 threshold with surgical precision. This requires:
Product Portfolio Analysis: Comprehensive review of existing SKUs to identify products that can be repositioned within the lower tax bracket without compromising brand equity.
Value Engineering: Redesigning products, packaging, or service bundles to maximize value delivery within the 5% tax bracket.
Dynamic Pricing Models: Implementing sophisticated pricing algorithms that account for tax implications across different product categories and seasonal variations.
Supply Chain and Inventory Management
The new tax structure demands operational excellence in inventory management and supply chain optimization. Companies need to reconsider their procurement strategies, vendor partnerships, and inventory allocation across price segments.
For e-commerce businesses and multi-channel retailers, this creates opportunities to optimize fulfillment costs and improve overall profitability. Understanding the true cost implications of the new tax structure becomes crucial for accurate margin calculations and pricing decisions.
Modern tools like return cost calculators become essential for e-commerce businesses to understand the complete cost structure of their operations. These tools help brands calculate the real impact of returns on profitability, especially important when operating with tighter margins in the new tax environment.
Technology and Compliance Infrastructure
The simplified GST structure reduces compliance complexity but demands robust systems for accurate tax calculation, reporting, and audit trails. Fashion brands must invest in:
ERP Integration: Seamless integration of tax calculation modules with existing enterprise resource planning systems.
Real-time Tax Computation: Dynamic tax calculation capabilities for e-commerce platforms and point-of-sale systems.
Audit and Reporting Capabilities: Enhanced reporting mechanisms to ensure compliance and optimize tax efficiency.
Future-Proofing Your Fashion Business
Embracing Digital Transformation
The new GST framework accelerates the need for digital transformation in fashion retail. Brands that leverage technology for pricing optimization, inventory management, and customer experience will gain sustainable competitive advantages.
Social media marketing becomes even more critical as brands need to communicate value propositions effectively across different price segments. Professional social media management helps brands maintain consistent messaging while adapting to new market dynamics.
Performance marketing strategies must evolve to target consumers more effectively across the new price-value spectrum. Brands need sophisticated digital marketing approaches to reach the right customers with the right products at the right price points.
Building Resilient Business Models
Forward-thinking fashion brands are already building resilience through:
Diversified Product Portfolios: Balancing products across both tax brackets to minimize risk and maximize opportunities.
Flexible Manufacturing: Developing capabilities to quickly adjust product specifications based on market response and tax implications.
Strategic Partnerships: Collaborating with suppliers, manufacturers, and service providers to optimize the entire value chain for the new tax environment.
Enhanced Customer Experience: Investing in superior customer service, faster delivery, and seamless returns processes to justify pricing strategies and build brand loyalty.
Navigating E-commerce and Marketplace Dynamics
The GST restructuring particularly impacts e-commerce businesses, which must now navigate complex pricing strategies across vast product catalogs. E-commerce and marketplace account management becomes crucial as brands need to optimize their presence across multiple platforms while maintaining price competitiveness.
Website development and maintenance requirements have evolved significantly, with businesses needing sophisticated pricing engines and tax calculation modules. Modern e-commerce platforms must handle dynamic pricing based on tax implications while providing transparent cost breakdowns to consumers.
The importance of efficient project and task management cannot be overstated as fashion brands juggle multiple initiatives simultaneously—from pricing restructuring to inventory rebalancing to compliance updates. Teams need robust systems to coordinate these complex, interdependent activities effectively.
