Original Article

Unravelling GST’s Impact on Clothing Prices and Choices: Evidence from Rajasthan Consumers

 

 

INTRODUCTION

The introduction of the Goods and Services Tax (GST) in 2017 within the territory of India was a major overhaul in the areas of Indirect Taxes. This particular change presented some of the most serious challenges to consumer markets Rao (2019). However, the one sector that has been impacted significantly is the textile and apparel industry since this is the direct part of the economy which influences the most household expenses and lifestyles Chakraborty and Biswas (2020). Within this context, Rajasthan containing vibrant centres of textile manufacturing, garments, handicrafts, and retail shops offers an excellent case to study the impact of GST on India clothing with regards to becoming more affordable, changes in demand and preferences, and more. Although it was designed to consolidate and simplify tax alongside enabling market liberalization, consumers have often had various perspectives, largely due to price and demand changes alongside ease of access to a wide range of garment types Taplin (2014). This research aims at uncovering these variations by concentrating on consumers and offers empirical evidence how GST has affected the everyday wear of the clothing segment of Rajasthan’s consumers.

 

 

LITERATURE REVIEW

Post economic liberalization era in India July 2017 is memorable for many reasons, one of which is the coming in force of the much-awaited revolutionary reform of the Goods and Services Tax Ghimire (2019). GST got introduced to eliminate the various state and central taxes complications and even worse introduction of GST was also followed by measures improving the tax system structure in a way that provides level principle of taxation across the entire nation Sureka and Bordoloi (2025). Inefficiency can be blamed in equal measure to states’ fiscal autonomy. Nonetheless, it was recognized that the cultural specificities of the federal structure of Indian polity would make it difficult to make wide-reaching reforms. The GST is one of the most radical reforms that occurred since the liberalization of the Indian economy Bhattarai (2017). This tax reform was primarily introduced to reduce cascading and push for one nation one tax regime. This was a sine qua non for removing various other inefficiencies arising from the existing multiple tax system. However, the ushering of GST also introduced control over the budget autonomy of states which may raise a conflict of interest between the state and the centre Asolekar (2021). Imposing a cap on the fiscal autonomy of a state may facilitate expeditious efficient and timely implementation of the GST but eventually betrays the spirit of cooperation among the centre and state suggested by the federal constitution Kir (2021). It was for this reason that it was resolved to integrate the working of the state and the market within the framework of the federal polity. In the context of both its privileges and limitations there are distinct features in the GST that have direct impact on equality. The straightforward truth is that, due to the retention of majority of the wordings and organising the existing provisions into the New GST Act, at best mixed results will be achieved in terms of formulating regulation geared at addressing the present challenges.

A number of scholars agree that consumption, and in particular the usage of I_T, is heavily impacted by indirect taxation levels Hines and Summers (2009). As clothing falls into the category of both a basic requirement and style essential, any change in its pricing will have a significant impact on the consumption. Consequently, Shetty (2019); indicated that, while the GST first eliminated the GST rates differences across different states, it also introduced compliance costs which were then transferred to the price to consumers hence the fluctuation of garments and fabric prices.

When discussing textiles in industrial contexts, the relevant evidence indicates a two-fold pattern. On the positive side, the introduction of the goods and services tax has certainly had an effect, the reduction in interstate barriers has resulted to more effective movement of such products and transaction costs have also been minimized Deardorff and Stern (2005), Jagetia (2020). This should consequently lead to reduced consumer prices in the textile sector. On the other hand, the benefits of reduced costs found it difficult to reach the consumers in form of promotional prices probably because the traders instead purchased within the channels and/or intra company transactions delayed the benefits Kusne et al. (2020).

Considering the framework of selected product such as clothing purchases, influence of the taxes relates only to products that are priced under a certain level Milios (2021). Relatively high level of penetration in the use of organized retailing in legalized setup has enhanced the physical presence of organized retailers, increased the spread of product ranges, driven operational efficiency and brand building but at the same time, decreased consumer preference for small informal retail outlets. The same trait was observed in textile markets of Rajasthan which cater to the needs of both urban and rural consumers; economy pricing offered in the malls and showrooms for a particular city, which is not the case for people in the in the rural areas Gupta et al. (2022).

Internationally, VAT reform can have the same results. A similar view has been outlined by Keen (2013) that once implemented, the reforms assist in regulating the markets leading to increased social welfare, yet it is also observed that the reforms while introduction leads to transient welfare costs for the poor and the middle class Chan (2018). Remarkably, Jha (2021) has concluded that in India, nonmetropolitan consumers got used to the changes owing to GST in the first place but had fewer clothing habits Babu (2019).

The vast literature available on Goods and Services Tax (GST) narratives dualistic scenarios of the phenomenon: it has efficiency and transparency as compliments but at the same time it’s a big change and shocks is transition which is a hard hit for the consumers Roy (2018). In most if not all, of the macroeconomic studies conducted, attention is usually focused on revenues, exports and production levels of a country. However, in the literature there is also a demand for the introduction of consumer-based studies showing how changes in consumer behaviour are affected by price changes. In these considerations, the state of Rajasthan stands out as it possesses a rich and vast textile heritage which services a multitudinous consumer base making it an attractive target to understand how GST has reduced either the real cost of clothes or modified the consumption behaviour of such people Chitnis (2020).

 

RESEARCH OBJECTIVES AND HYPOTHESES

Objective 1:

To examine the effect of GST-driven clothing price increases on consumer purchasing behaviour in Rajasthan.

·        Hypothesis (H1): GST-driven increases in clothing prices have a significant negative effect on consumer purchasing behaviour.

Objective 2:

To analyse how affordability concerns shape consumer choices toward lower-cost or unbranded clothing alternatives.

·        Hypothesis (H2): Affordability concerns significantly influence consumer shifts toward lower-cost or unbranded clothing alternatives.

Control Variable Consideration:

·        Objective 3 (Supporting): To evaluate the moderating role of consumer income levels in shaping the impact of GST-related price and affordability changes.

·        Control Variable: Income level moderates the relationship between price/affordability and consumer purchasing choices.

 

RESEARCH METHOD

This investigation applies primary survey-based cross-sectional research to evaluate the extent of GST’s impact on clothing cost trends and consumer habits in Rajasthan. In specific, a structured questionnaire consisting of close ended questions and Likert scale was administered to 120 respondents each, representing the areas of Jaipur, Sanganer and Bagru which are clothing, block printing and fabric producing districts. As the research aim was to explore and present contributions of different respondents relative to the affordability and purchase of the garment, restricted sample in terms of urban respondents and semi urban respondents was purposefully selected to ensure that other categories of respondents limited as much as possible. As for the targeted number of 120, such size of the sample is sufficient for field research on consumer behaviour and there are enough observations for regression-based analysis. The instruments used to collect data were checked for reliability and any missing data was compared from the existing data and where necessary, imputed. The data was then collated and summaries generated using descriptive statistics that would provide a clearer picture of the research subjects’ perspectives. This was a quantitative approach to research aimed at testing the theoretical framework and therefore, estimates of the population parameters by use of regression analysis.

 

ANALYSIS AND INTERPRETATION OF PRIMARY DATA

RESPONDENTS’ DEMOGRAPHIC BACKGROUND

The profile of 120 sample respondents is presented which includes information on gender, age, educational level, income, and location distribution in the specified area (Jaipur, Sanganer and Bagru).

Variable	Categories	Frequency (n=120)	Percentage (%)
Gender	Male	65	54.2
	Female	55	45.8
Age Group	18–25 years	28	23.3
	26–35 years	34	28.3
	36–45 years	32	26.7
	46 years and above	26	21.7
Education	Up to Secondary	20	16.7
	Undergraduate	46	38.3
	Postgraduate	42	35
	Others	12	10
Monthly Income	< ₹20,000	30	25
	₹20,001–40,000	38	31.7
	₹40,001–60,000	28	23.3
	> ₹60,000	24	20
Location	Jaipur	40	33.3
	Sanganer	40	33.3
	Bagru	40	33.3

 

The data is fairly representative of the populations within Jaipur, Sanganer, and Bagru. This is because the study has male and female subjects evenly spread in different graduated age groups. A majority of the subjects fall within the 26–45 age bracket would suggest this is a group with a high economic activity level. Most respondents seem to have attained a college and more advanced education which is a signal of a literate society. As for the wage earners distribution, the earnings are unevenly distributed through various classes with a vast group concentrated within the mid-cost level that is easier to sway with the factor of prices of clothes.

 

DESCRIPTIVE STATISTICS OF KEY VARIABLES

Variable	Mean	Std. Dev.	Min	Max
Price Perception	3.42	0.85	1	5
Affordability	3.68	0.74	1	5
Purchase Frequency	2.95	0.81	1	5
Brand Preference	3.12	0.92	1	5
Shift to Alternatives	3.35	0.87	1	5

 

In comparison, the average score concerning the price increase following the GST implementation was 3.42, indicating the middle ground or no agreement at all. Affordability was an even more expensive commodity with a mean of 3.68 referring to people who faced cost pressures due to the higher financial capacity. Otherwise, the purchasing frequency was contained at a mean that is less than 3 which also signifies some degree of moderation in purchasing of apparels. The slight increase in the mean scores for brand preferences and switch costs suggests that some consumers chose the cheaper alternatives.

 

REGRESSION ANALYSIS WITH HYPOTHESIS TESTING

Predictor Variable	Beta (β)	t-value	p-value	Result (Hypothesis)
Price Perception	-0.32	-2.75	0.01	Supported (H1)
Affordability	0.41	3.85	<0.001	Supported (H2)
Income Level	0.27	2.01	0.05	Supported
Model Summary: R² = 0.46, Adjusted R² = 0.44, F-statistic = 14.92 (p < 0.001)

 

With 46% of the variance in consumer purchasing behaviour explained by the regression model, it is statistically significant. Price perception has a detrimental impact on the frequency of purchases, supporting H1 that price rises connected to GST lower affordability and buy frequency. Concerns about affordability substantially predict a move toward less expensive or unbranded apparel, which supports H2. Income is a moderating factor; respondents with greater incomes are less impacted by price changes brought on by the GST.

 

CONCLUSION AND RECOMMENDATION

This particular study set out to determine the impact of Goods and Services Tax (GST) on prices of textiles and the behaviour of consumers in the state of Rajasthan with the main focus given to Jaipur, Sanganer, and Bagru. Three key findings can be drawn from the primary survey conducted on 120 respondents and the regression analysis all of which suggest that GST surged in two ways. The first way refers to making the retail markets transparent and standardized and the second way relates to enhancing the prices of clothing, hence this is probably deferred to the middle and especially the lower strata of the society. Study also noted that Price consciousness negatively grounded purchase actions, while the desire for affordability kicked in and enabled many respondents to alternatives such as non-branded clothes or cheap clothing. Unlike the rest source wealthier audience groups showed no decline while some of them resorted to the purchase of high-end cost products. This is an indication of the problems of GST burden for different consumer groups. To soften these problems, it is recommended that the government adopt both of the measures. They can reduce the cost pass to the subject of the tax to rationalizing GST rates of essentials clothing and by improving the current refund system. For competition, the fabric industry may expand towards the use of multi-unit pricing and arts like the tradition printing of garments like the Sanganer Block printed cloths and that of Bagru would be boosted. The ways they could probably benefit are training customer potential base the process of subjectivity as regards to goods and services and even involving third parties in the process of making payments such as availing two in one product. In general, GST brought about some positive changes as far as the fiscal policy of the country is concerned. However, if one looks at the consumption of textiles in the state of Rajasthan it cannot be said that such tax systems are in place. Balanced tax systems, targeted industry programs, and information campaigns are required for the purpose of supporting the development of this sector as well as expanding protection of customers.

  

ACKNOWLEDGMENTS

None.

 

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