The Central Board of Indirect Taxes and Customs (CBIC) on Thursday notified raising GST rate to 12% from 5% on fabrics, apparel from January 2022. Also, GST on apparel of any value has been increased to 12%. Earlier, GST was 5% for sale value up to ₹1,000 per piece.

The changes effected will increase prices of all fabrics and garments, the industry body said in a statement. The hike was based on the recommendations of the GST Council, according to media reports.

"CMAI, along with associations and trade bodies from all over India have been vigorously representing to the government and GST Council not to implement this change, and it is indeed extremely disappointing that the Council has chosen not to heed their plea," Rajesh Masand, president, CMAI said in the statement.

The impact of this cost increase will be pronounced as the industry is facing inflationary headwinds, with prices of raw materials, especially yarn, packing material, and freight on an upswing.

The market was expected to see a 15-20% price increase in apparel cost in the coming season even without the GST rate increase, the industry body said.

Over 80% of India's apparel market comprises garments priced below ₹1,000, it added.

"CMAI believes this measure is completely misplaced, as it is reportedly introduced primarily to address the Inverted Duty Structure existing in a section of the Industry – and this sector is not more than 15% of the total industry. To resolve a problem which exists in 15% of the Industry therefore, this move will adversely impact 85% of the total industry," said Masand.

CMAI will continue to dissuade the government as well as the GST Council to not go ahead with this change of rate.