The Retailers Association of India (RAI) has welcomed the introduction of a cleaner two-slab GST framework, describing it as a crucial reform that paves the way for simpler, fairer, and more transparent taxation. According to the association, the step is significant not only for its immediate economic benefits but also for the long-term stability it can bring to the retail ecosystem. The reform is expected to:
- “Lower consumer prices” by streamlining rates and reducing cascading taxes.
- “Stimulate demand and consumption“, giving a boost to both urban and rural markets.
- “Enhance the ease of doing business“, particularly for retailers and MSMEs who have struggled with compliance challenges under the earlier structure.
- “Support overall retail sector growth“, making it more competitive and sustainable in the global economy.
Positive Developments
RAI has especially appreciated the government’s move to remove the “inverted duty structure across the textile value chain“. This long-awaited step brings greater clarity, balance, and predictability to the sector. By ensuring that input and output taxes are aligned, the reform removes confusion, prevents revenue leakage, and supports stronger compliance. It also enables the textile industry—one of India’s largest employment generators—to become more competitive, which in turn benefits retailers who depend heavily on fair and consistent pricing.
Key Concerns Raised by RAI
Despite welcoming these positive changes, RAI has underlined several critical concerns that still remain in the GST structure.
Structural Flaws in Price-Based GST Slabs
RAI has strongly recommended shifting from price-based thresholds to a flat GST rate across product categories. According to the association, reliance on price slabs continues to cause structural flaws, such as:
- Distortions in the marketplace that encourage grey market activity.
- Misreporting of invoices, which creates compliance burdens for genuine businesses.
- Damage to organised retail, particularly in the mid-range and premium product categories.
- Discouragement of domestic manufacturing, which runs counter to the objectives of the Make in India initiative.
- Creation of artificial barriers that force consumers to downgrade their purchases instead of encouraging organic demand expansion.
Garments and Footwear Above 2,500
Another concern highlighted by RAI is the placement of garments and footwear priced above ₹2,500 in the “18% GST slab“. The association argues that such a move could:
- Reduce affordability for the middle class, who form the backbone of India’s consumption economy.
- Weaken the organised retail and garment manufacturing sector, already facing margin pressures.
- Adversely impact categories such as “wedding apparel, winter wear, artisan-made clothing, festive collections, and traditional handloom products.”
RAI’s Recommendation: All garments and footwear should ideally be taxed at 5% GST. At the very least, the government should revise the price threshold to a more reasonable level so that affordability and retail viability are protected.
Mobile Phones (Still Taxed at 18%)
RAI has maintained that mobile phones are essential goods and not luxuries. In the digital age, affordable access to smartphones is critical for education, commerce, and communication. Lowering GST from 18% to 5% would:
- Boost affordability for a wide section of society.
- Strengthen the government’s Digital India Mission.
- Expand access to digital tools for students, workers, and small entrepreneurs across the country.
GST on Commercial Rentals
RAI has also reiterated its demand to reduce GST on commercial rentals from 18% to 5%. The association argues that:
- Renting is simply the grant of the right to use immovable property, and should not be equated with services or manufacturing activity.
- Properties are already subject to state levies such as stamp duty, property tax, and registration fees, leading to double taxation.
- The 18% GST on rentals blocks working capital, affecting cash flow management.
- The burden is especially severe for lakhs of small and medium retailers who operate in rented spaces.
RAI’s Recommendation: Reduce GST on commercial rentals to 5% to ensure retail viability and eliminate inverted duty structures across key categories.
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