India’s textile industry has urged the government to implement a uniform 5% GST rate across all textile segments, aiming to eliminate the inverted duty structure and promote growth across fibre types including cotton, polyester, and viscose.
In India, the textile industry has intensified its call for a uniform 5% Goods and Services Tax (GST) across the entire textile and apparel value chain. The move is aimed at eliminating the prevailing inverted duty structure, which industry stakeholders say is hampering growth and blocking working capital for manufacturers, particularly in the Man Made Fibre (MMF) segment.
At present, the cotton-based textile sector enjoys a 5% GST rate, except for garments priced above ₹1,000, which are taxed at 12%. In contrast, the MMF value chain faces a fragmented tax regime: 18% GST on raw materials like Purified Terephthalic Acid (PTA) and Monoethylene Glycol (MEG), 12% on MMF yarn, and 5% or 12% on fabrics and garments depending on pricing thresholds. This cascading tax burden often results in an input tax credit accumulation, especially affecting micro, small, and medium enterprises (MSMEs).
Industry experts argue that a fibre-neutral GST policy will ensure a level playing field for all textile segments—cotton, viscose, and polyester—and drive broader industrial expansion. The MMF sector, which produces more affordable clothing options for the masses, is seen as crucial for India to achieve its ambitious textile targets of $100 billion in annual exports and $250 billion in domestic sales by 2030.
Despite these growth targets, no major capacity expansion has been reported in the viscose segment, while the cotton sector remains stagnant. Therefore, stakeholders believe that rationalizing GST from the raw material stage is essential for the MMF sector to unlock its potential.
Calls for reform also point out that garments and fabrics priced above ₹2,000 could remain under the 12% bracket, while a uniform 5% rate should apply to all other segments. This would not only simplify compliance but also attract investments in a sector known for being India’s largest employment generator outside agriculture.
By creating a tax environment that promotes operational efficiency, reduces financial strain on MSMEs, and supports demand-driven production, the industry believes India can reclaim a stronger foothold in global textile trade.
