The government has termed the recent round of GST reforms as a game-changing move for the textile industry of India, estimating that they will speed up the country's path towards creating a $350 billion textile economy by 2030.
Renewing its pledge, the Ministry of Textiles stated that it will continue to work in close association with exporters, artisans, entrepreneurs, and industry partners to see that these steps are implemented effectively.
These reforms, the ministry said, will decrease the cost of production, rectify structural imbalances, save jobs, and strengthen each link of the textile value chain—from fibre creation to international markets.
The policy revolution is fully aligned with the 5F vision of the Prime Minister (Farm to Fibre to Factory to Fashion to Foreign), which has the goal of making India a global leader in textiles.
GST rationalisation will remove distortions, reduce manufacturing costs, increase domestic demand, support exports, and enhance India's position in global trade.
By removing anomalies at the fibre level, reducing costs at yarn and fabric levels, making apparel more price-competitive, and increasing competitiveness in exports, the reforms also reinforce India's fibre-neutral strategy—providing balanced growth opportunities for cotton and man-made fibres.
One of the significant changes is increasing the 5 per cent GST limit on readymade clothing and made-ups to Rs 2,500 per unit from Rs 1,000 per piece, bringing clothes within the reach of middle- and lower-income groups further. The move is likely to give a fillip to consumption in tier-2 and tier-3 cities as well as rural areas.
Since garmenting is labor-intensive, increased demand will drive and maintain jobs, particularly among women in stitch units, tailoring units, and finishing units. The shift will also help 'Make in India' brands compete with value-deflation imports in low and mid-price segments," the ministry added.
Major tax cuts involve the reduction of GST on fibres from 18 per cent to 5 per cent and yarns from 12 per cent to 5 per cent. This not only resolves the issue of inverted duty structure once and for all but also releases working capital of manufacturers. With most of India's man-made fibre production in the small and medium units, the cuts should ease the financial burden, enhance the cash flows, and increase the global competitiveness—strenthening the nation's pursuit of becoming number one in synthetic textiles as well as MMF garments.
In carpets and flooring coverings, GST has been cut back from 12 per cent to 5 per cent. This will be likely to spur exports from centers such as Bhadohi and Srinagar, and also bolster traditional crafts and enhance affordability in the domestic markets.
The government has also reduced GST from 12 per cent to 5 per cent on 36 handicraft items, such as cotton rugs and handwoven carpets under HS 5705, which brings relief to artisans, increases rural incomes, and saves India's rich craft heritage.
As an added measure, the mechanism for refund of zero-rated supplies and inverted duty structures has been streamlined with a system-based risk assessment process. The exemption threshold of Rs 1,000 on small consignments through courier and postal means has also been revoked by the government, and a facilitated GST registration procedure for low-risk, small players has been brought in—steps likely to further simplify compliance.
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