SIMA Welcomes 5% Uniform GST on MMF Textiles to Boost Growth

The Indian textile industry, the second-largest employment provider after agriculture and a lifeline for over 110 million people, especially rural workers and women, has been facing stagnation. A key reason has been the high cost of MMF (man-made fibre) clothing caused by higher GST rates on MMF fibres, filaments, and yarns. When the Government implemented the “One Nation, One Tax” reform by introducing GST, it streamlined multiple tax structures and closed loopholes for tax evasion. However, raw materials for MMF clothing — widely used by the masses — were taxed at 18% and 12%, whereas fabrics and garments were taxed at 5%. This led to a severe duty inversion, increasing the cost of affordable clothing and encouraging the dumping of cheaper MMF fabrics and clothing into the Indian market, thereby stifling growth in the MMF textile value chain.

Globally, MMF textiles account for 70% of fibre consumption, but in India, the figure stands at only 30%, primarily due to this tax structure. The resulting blockage of working capital because of duty inversion has severely affected profitability and growth in the textile sector. The Government has rolled out several initiatives — including the National Technical Textiles Mission (NTTM) with ₹1,480 crores, PLI Scheme with ₹10,683 crores, and PM MITRA Parks Scheme with ₹4,445 crores — to attract major investments in the MMF textile chain. However, their intended results were not fully achieved due to the higher GST rates on MMF raw materials and yarns.

Dr Sundararaman K S (Chairman, SIMA)

In a press release issued today, Dr. S.K. Sundararaman, Chairman, SIMA, expressed deep appreciation and gratitude to Hon’ble Prime Minister Shri Narendra Modi, Hon’ble Union Minister of Finance Smt. Nirmala Sitharaman, Hon’ble Union Minister of Commerce & Industry Shri Piyush Goyal, and Hon’ble Union Minister of Textiles Shri Giriraj Singh for introducing this historic tax reform. He praised the Government for aligning the entire MMF textile value chain under the 5% GST slab, a long-standing demand of the industry, addressing structural issues in MMF raw materials.

Dr. Sundararaman highlighted that the Government aims to grow India’s textile business from USD 172 billion to USD 350 billion and boost exports from USD 37 billion to USD 100 billion. He noted that textile exports have remained stagnant at USD 37 billion for over 12 years and that declining cotton production has further limited growth. To achieve this vision, the country would require approximately 22 billion kgs of raw material (fibres and filament yarns) compared to the current 12 billion kgs, with polyester expected to play a crucial role as the growth driver for the industry.

He pointed out that although PTA & MEG and wood pulp (raw materials for polyester and viscose) continue to attract 18% GST, the government’s decision to allow 90% provisional refunds within seven days — a facility not available earlier under inverted duty refund — will address duty inversion for MMF producers. Given the limited number of MMF manufacturers, the government can quickly resolve their tax issues, benefitting lakhs of manufacturers, traders, and consumers.

The SIMA Chairman also applauded the government for achieving fibre neutrality, closing tax loopholes, and ensuring 100% compliance by bringing the entire industry under the 5% GST slab. He emphasized that this step fully supports compounding taxpayers who pay 1% tax. According to Dr. Sundararaman, this timely initiative by the Hon’ble Prime Minister will help counter abnormal US tariffs on Indian goods.

He further stated that domestic consumption can rise by 7–10% in a short span, significantly boosting per capita consumption, increasing government revenues, and enabling the textile industry to better navigate global trade challenges.