New Delhi, 5 December 2024 – The Confederation of Indian Textile Industry (CITI) has raised concerns over the proposed GST rate revisions on ready-made garments, warning of potential far-reaching impacts on the textile industry, employment, and the overall economy.

Under the proposed framework, garments priced up to ₹1,500 will continue to attract a 5% GST rate. However, garments priced between ₹1,500 and ₹10,000 will face a steep increase to 18%, and those priced above ₹10,000 will fall under the highest tax slab 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.

“Higher taxes on garments tied to celebrations and festivals will slow down consumption at a time when demand is already under pressure. This could have a ripple effect on the economy, and the textile sector is a cornerstone of India’s economy, providing livelihoods to millions. Policies must nurture its growth rather than create hurdles,” said Sh. Rakesh Mehra, Chairman, CITI