The Clothing Manufacturers Association of India (CMAI) has welcomed the government’s recent reforms in Goods and Services Tax (GST) rates, especially those affecting the textile and apparel sector. As the second-largest employment provider after agriculture, the textile industry has consistently called for GST-related reforms that simplify compliance, reduce bottlenecks, and strengthen the value chain. CMAI believes the latest measures represent a significant breakthrough, striking a balance between industry requirements and consumer affordability while ensuring sustainable growth.
A major reform applauded by CMAI is the removal of the inverted duty structure through rationalization of GST rates. Earlier, raw materials and finished products were subject to different tax rates, creating input credit blockages and inefficiencies across the textile value chain. This imbalance placed an unnecessary burden on businesses and complicated compliance. By introducing a uniform 5% GST rate across all stages—from fiber production to garment retail—the government has created a simplified and predictable taxation environment. This step will ensure smoother credit flow, remove distortions, and provide a level playing field for manufacturers, exporters, and retailers. With taxation streamlined, companies can now focus on scaling operations, innovating designs, and improving competitiveness in both domestic and global markets.
Equally significant is the adoption of a fiber-neutral policy under GST rates. For decades, cotton and man-made fibers (MMF) were taxed differently, creating distortions in pricing and demand. Aligning MMF with cotton under the same 5% GST slab has corrected this disparity. CMAI has welcomed this move, stressing that it will encourage greater use of MMF—essential for India’s global competitiveness—while safeguarding cotton’s importance in the domestic sector. Neutrality in GST rates provides manufacturers with the freedom to diversify fabric choices, explore blends, and innovate without being constrained by tax disparities. This reform is expected to boost product variety, improve efficiency, and strengthen India’s positioning in international textile markets.
CMAI has also endorsed the revision of the garment price threshold eligible for the 5% GST rate. Raising the ceiling from Rs. 1,000 to Rs. 2,500 reflects inflationary trends and consumer realities. This change expands the scope of garments that fall under the lower tax rate, making quality apparel more affordable for India’s vast middle class. For manufacturers and retailers, it is expected to stimulate demand, broaden the consumer base, and create growth opportunities in the mid-range apparel segment, which constitutes a significant share of the domestic market.
However, CMAI has voiced concerns regarding garments priced above Rs. 2,500, which remain outside the 5% GST slab. The association has pointed out that such products are not always luxury items. Woolens for colder regions, ethnic wear, artisanal handlooms, and occasion-specific apparel often cross this price point. Applying higher GST rates to these categories risks reducing consumer access and undermining the livelihoods of artisans, weavers, and small enterprises. To address this issue, CMAI has recommended extending the 5% GST rate to all garments or raising the threshold to a more realistic level, ensuring inclusive and balanced growth.
Reaction on GST Hike
While discussing with Pradip of Indian-Apparel.com, Anurag, President of the South India Garment Association, shared his candid remarks on the recent GST revisions:
- “This was expected” – Industry stakeholders had anticipated a restructuring of GST rates, though many hoped for a rationalisation that would reduce, not increase, the burden.
- “A big blow to the common man” – The rise from 12% to 18% will directly impact affordability. For middle-class families, especially those planning weddings and social occasions, the budget for garments and apparel will be significantly disturbed.
- “Now the common man has to pay more” – This hike adds pressure to household budgets, making everyday and festive wear costlier, while also raising concerns of reduced consumption in the mass-market segment.
Anurag further cautioned that this increase could dampen consumer sentiment and affect overall sales in the apparel sector. He added that small and medium enterprises, particularly those catering to affordable wedding wear and festive clothing, may be hit hardest—potentially leading to a slowdown in employment and production.
Reaction on GST Reforms
While discussing with Indian-Apparel.com, Sanjay K. Jain, Chairman of the ICC National Textiles Committee, described the new GST reforms as a “Big WOW for Indian citizens.”
He elaborated that the reforms will bring:
- ✅ Lower inflation
- ✅ Higher disposable income for consumers
- ✅ More demand in the economy
- ✅ Improved cash flow for businesses
- ✅ Fewer inverted duty issues
Specific to Textiles:
- The long-standing demand for removal of the inverted duty structure in MMF yarn & fabric has finally been addressed.
- Garments under the 5% GST slab now have a higher threshold of ₹2,500, making mass-market apparel more affordable.
- Garments priced above ₹2,500, however, will become 5% more expensive as they move under the higher GST slab.
Sanjay K. Jain emphasized that while there are pros and cons, these reforms mark a significant step toward rationalizing GST, strengthening consumer confidence, and improving competitiveness across the textile value chain.
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