The GST rationalisation to Power India’s Textile Sector

The Indian textile industry has warmly welcomed the recommendations of the 56th Meeting of the GST Council, held in New Delhi on 3rd September 2025. These recommendations, made under the Next-Generation GST reforms announced by Prime Minister Shri Narendra Modi on 15th August 2025, are being hailed as a citizen-friendly and forward-looking step in India’s tax framework.

Reflecting the spirit of “Virasat Bhi, Vikas Bhi”, the reforms promise to strengthen India’s textile value chain, support weavers and artisans, and make India’s textile and apparel sector globally competitive.

Why the GST Reforms Matter in Textile Sector

The textile sector is one of the largest employers in India, deeply rooted in tradition yet constantly evolving with modern demands. These GST rationalisations are expected to:

• Reduce costs across the textile supply chain.
  
• Correct long-standing structural anomalies.
  
• Sustain and expand employment opportunities, especially for women.
  
• Boost domestic consumption and exports.
  
• Support India’s goal of reaching a USD 350 billion textile and apparel market by 2030.
  

Aligned with the 5F Formula—Farm to Fibre to Factory to Fashion to Foreign—these reforms aim to place India firmly on the global textile map.

Key GST Rationalisations in Textile Sector

1. Readymade Garments & Made-Ups

• 5% GST applicable on items priced up to ₹2,500 (earlier ₹1,000).
  
• Affordable clothing will now be cheaper, reviving demand especially in Tier-2, Tier-3, and rural markets.
  
• This step supports employment generation, particularly for women in stitching, tailoring, and finishing units.
  
• Domestic Make in India brands will gain competitiveness against low-priced imports.
  

2. Man-Made Fibres & Yarns

• GST reduced from 18% → 5% on fibres and 12% → 5% on yarns.
  
• This correction removes the inverted duty structure (IDS) and reduces cost burdens on manufacturers.
  
• Particularly benefits small and medium units, strengthening cash flows and making India a hub for synthetic textiles and MMF garments.
  

3. Carpets & Floor Coverings

• GST reduced from 12% → 5%.
  
• Boosts exports from traditional clusters such as Bhadohi and Srinagar, while improving affordability in domestic markets.
  

4. Handicrafts & Handlooms

• GST reduced from 12% → 5% on 36 handicraft items, handwoven carpets, and cotton rugs of handloom.
  
• Provides much-needed relief to artisans and rural communities, preserving India’s rich craft heritage.
  

5. Sewing Machines

• GST reduced from 12% → 5% for both domestic and industrial sewing machines.
  
• This will lower costs for tailoring units and encourage domestic manufacturing.

Complementary Measures

Along with tax cuts, the GST Council has also introduced measures to ease compliance for small businesses:

• Simplified refund process for zero-rated supply and inverted duty structure.
  
• Removal of ₹1,000 threshold for small consignments via courier/postal mode.
  
• Simplified GST Registration Scheme for small and low-risk businesses.
  
• Simplified registration for suppliers selling through e-commerce platforms.
  

These changes are expected to reduce operational hurdles, especially for MSMEs, making business easier and more efficient.

A Historic Leap for Indian Textiles

The Next-Generation GST reforms represent a landmark moment for India’s textile industry. By lowering production costs, reviving consumer demand, and empowering exporters, these measures reflect the dual vision of heritage preservation and global growth.

With the government and industry working hand-in-hand, India is set to move closer to its ambition of becoming a USD 350 billion textile powerhouse by 2030.

Starting a Textile Business in India

With the government’s focus on strengthening the textile value chain, many entrepreneurs are looking to enter the industry. The first step to starting your textile or apparel venture is company registration in India.

By choosing the right structure—such as a Private Limited Company, LLP, or One Person Company—you can take advantage of tax reforms, government schemes, and export benefits.

Today, online company registration services make it easy and affordable to incorporate your business. With professional help, you can quickly complete the process, access funding opportunities, and build credibility in the textile market.

If you are planning to register your company, consult with us  to ensure a smooth start for your business journey.

FAQs on GST Reforms in Textiles

Q1. What is the significance of the recent GST reforms for the textile industry?
The reforms lower GST rates on garments, yarns, fibres, carpets, handlooms, and sewing machines. This reduces costs, revives demand, and strengthens India’s competitiveness globally.

Q2. How will GST rate cuts on readymade garments benefit consumers?
Affordable garments priced up to ₹2,500 now attract just 5% GST, making clothing cheaper for middle-class and rural households while boosting demand in Tier-2 and Tier-3 towns.

Q3. What change has been made for man-made fibres and yarns?
GST has been reduced to 5% on both fibres (from 18%) and yarns (from 12%), correcting the inverted duty structure and easing cost pressures for small and medium manufacturers.

Q4. How do these reforms support artisans and weavers?
GST has been reduced from 12% to 5% on 36 handicraft items, handwoven carpets, and cotton rugs of handloom. This supports rural livelihoods and preserves India’s craft traditions.

Q5. Will these GST reforms impact employment in the textile sector?
Yes. With increased demand for garments and handlooms, more jobs are expected in tailoring, stitching, finishing, and traditional crafts, especially benefiting women workers.

Q6. What complementary measures have been introduced along with GST rationalisation?
The GST Council has simplified the refund process, removed the ₹1,000 threshold for courier consignments, and introduced easier GST registration for small businesses and e-commerce suppliers.

Q7. How do these reforms align with India’s long-term textile vision?
They align with the Prime Minister’s 5F Formula (Farm to Fibre to Factory to Fashion to Foreign), positioning India as a global textile hub and targeting a USD 350 billion market by 2030.