Concerned about the planned changes to the GST rate on ready-made clothing, the Confederation of Indian Textile Industry (CITI) has issued a warning about the possible wide-ranging effects on the textile sector, jobs, and the economy as a whole.
Clothes up to ₹1,500 will still be subject to a 5% GST rate under the proposed structure. But clothing that costs between ₹1,500 and ₹10,000 would see a sharp increase to 18%, and clothing that costs more than ₹10,000 will be subject to the highest tax rate of 28%.
GST Challenges in the MMF Sector
CITI has also flagged the persistent issue of an inverted duty structure (IDS) in the man-made fibre (MMF) segment, where varying GST rates across the value chain block working capital and stifle growth.
| Segment | Cotton | MMF |
| Fibre | 5% | 18% |
| Yarn | 5% | 12% |
| Fabrics (woven, knitted) | 5% | 5% |
| Garments* | 5% or 12% | 5% or 12% |
| Home Textiles & Made ups* | 5% or 12% | 5% or 12% |
GST rate is 5% if the product value is <₹1,000, otherwise charged at 12%.
CITI reiterated its previous recommendations to reduce GST rates on raw materials such as PTA and MEG from 18% to 12%, which would ease the IDS issue in the MMF sector without impacting government revenues. CITI fears that the proposed hike will disrupt the formal retail sector, driving consumers and businesses toward informal and unregulated channels.
Employment Losses and Sectoral Impact
The textile industry, already facing economic strain, stands to lose up several jobs, particularly in small and medium enterprises (SMEs) involved in spinning, weaving, and garment manufacturing.
The proposed GST hike is expected to heighten price inflation, disproportionately affecting price-sensitive consumers. CITI has urged the government to reconsider the proposed GST rate hike and adopt a balanced approach that fosters growth in the textile sector while ensuring consumer affordability.
