Indian textile sector pushes for 5% uniform GST rate

Industry bodies have long demanded that the entire textile value chain be brought under the lowest 5 per cent rate to avoid inverted duty structures. They also urged the Council to refrain from imposing an 18 per cent tax on garments priced above ₹2,500, as recently speculated, warning that such a move could hurt categories like branded garments, winter wear, and ethnic wedding attire.

The Southern India Mills’ Association (SIMA), along with other trade bodies and export promotion councils, has specifically demanded that the entire man-made fibre (MMF) value chain be taxed at 5 per cent, on par with the cotton chain. This request was raised directly with Union Finance Minister Nirmala Sitharaman during an interaction in Chennai on September 2, 2025, attended by representatives of all major textile associations and export councils. A uniform GST, they argued, would resolve inverted duty issues, refund accumulated capital goods GST credit, and improve liquidity.

SIMA chairman Dr S K Sundaraman thanked the Finance Minister for engaging with industry representatives and recognising the unprecedented challenges faced by the sector due to US tariffs. He said the minister indicated that a major revamp of GST rates and systems is likely, paving the way for historic tax reforms that will ease business operations and enhance global competitiveness. Sundaraman also noted that Sitharaman has shown willingness to address inverted duty structures to ensure GST does not escalate costs for consumers.

The Clothing Manufacturers Association of India (CMAI) also called on the Council to avoid price-based taxation, cautioning against raising the GST rate on garments above ₹2,500 from 12 per cent to 18 per cent.

According to CMAI, such a move would severely affect middle-class consumers and the organised garment manufacturing sector, which is already struggling due to tariff wars. It stressed that higher-priced garments are not necessarily luxury items, but often costlier due to raw material prices, artisan handwork, and production complexity.

For instance, most woollen garments essential for middle-class consumers across North, North-East, and East India are priced between ₹3,500 and ₹7,000. Similarly, wedding wear typically ranges from ₹10,000 to ₹15,000, while artisan-made clothing commands higher prices due to the time and craftsmanship involved. Subjecting these categories to an 18 per cent GST would, CMAI argued, devastate purpose-specific clothing segments.

CMAI has urged the Prime Minister to intervene, emphasising that the garment industry is the backbone of India’s textile heritage and a vital source of employment for millions—particularly women, semi-skilled, and unskilled workers.

ALCHEMPro News Desk (KUL)