The practice of dressing up for church is not supported by the Bible. It is even condemned in James 2:1-5 when it is used to create divisions.
The practice of dressing up for church started in the late 18th century and became widespread in the mid-19th century. Before this only the well-to-do could afford nice clothing. Common people only had work clothes for labor and less tattered clothes for going into town. The industrial revlolution gave rise to a middle-class and fine clothes became more affordable. The middle-class began to "dress up" for social events just like the rich did before. Some sects resisted the trend. Early Methodists turned away from church anyone in expensive clothes. The Baptists frowned on fine clothing, because it seperated the rich from the poor. In 1843 a Conregational Ministor named Horace Bushnell pulished an essay called "Tast and Fastion". He argued that sophistication and refinement were attributes of God and that Christians should emulate them. This attitude became dominant and eventually the Methodists gave in to new norm of "dressing up" for Church.
The Bible Students and Jehovah's Witnesses original from the time-period where dressing up for Church was expected. The real question is why it is maintained as society shifted away from formal church dress. My suggestion is that Jehovah's Witnesses use their clothing to set them apart from other religious groups. It is part of their look and an effective trademark. I can remember being at the Kingdom Hall and other religions that dressed nicely but less formal were openly mocked.