Next-Gen GST Reforms Poised To Propel India's Textile Industry To $350 Billion Textile Economy By 2030

New Delhi: The next-generation GST reforms are a historic leap forward for India’s textile sector, serving as a catalyst for the country’s march towards becoming a $350 billion textile economy by 2030, according to the government.

The Ministry of Textiles has reaffirmed its commitment to work hand-in-hand with industry stakeholders, exporters, artisans, and entrepreneurs to ensure these reforms are operationalised. These landmark reforms are expected to reduce costs, remove structural anomalies, sustain jobs, and strengthen the entire textile value chain—from fibre to fashion to foreign markets.

The reforms are fully aligned with the Prime Minister’s visionary 5F formula (Farm to Fibre to Factory to Fashion to Foreign), which seeks to position India as a global textile powerhouse. The GST rationalisation in textiles will remove distortions, lower production costs, boost demand, support exports, and enhance India’s global competitiveness.

The reforms correct anomalies at the fibre stage, reduce costs at the yarn and fabric stages, improve garment affordability, revive demand at the retail stage, and enhance export competitiveness. Importantly, these measures give a strong impetus to India’s fibre-neutral policy, ensuring balanced growth across cotton and man-made segments. The 5 per cent GST rate up to Rs 2,500 per piece (earlier Rs 1,000) on items of readymade garments and made ups makes affordable apparel cheaper, particularly for middle-class and low-income households.

It is expected to revive demand in tier 2 and 3 towns and rural markets. “Given the labour-intensive nature of garmenting, higher demand will sustain and expand employment, especially for women in stitching, tailoring, and finishing units. The move will also support ‘Make in India’ brands, helping them compete with cheap imports in low and mid-price segments,” said the ministry. GST has been reduced from 18 per cent to 5 per cent on fibres and 12 per cent to 5 per cent on yarns.

This corrects the inverted duty structure (IDS), aligns fibre–yarn–fabric rates, and removes long-standing working capital burdens on manufacturers. With a large share of Man-made fibres (MMF) production in small and medium units, the cut eases cost pressures, strengthens cash flows, and makes Indian MMF-based garments globally more price-competitive—supporting India’s ambition to emerge as a hub for synthetic textiles and MMF garments.

On carpets and floor coverings, the GST has been reduced from 12 per cent to 5 per cent. This will boost exports from clusters such as Bhadohi and Srinagar, strengthen traditional crafts, and improve affordability in domestic markets. The tax has been reduced from 12 per cent to 5 per cent on 36 handicraft items, cotton rugs of handloom, and handwoven carpets under HS 5705.

This measure will provide relief to artisans, enhance rural livelihoods, and support India’s rich craft traditions. The simplification of the refund process in the case of both zero-rated supply and inverted duty structure, based on system-driven risk evaluation. The removal of the Rs 1,000 threshold for small consignments using courier/postal mode is a very positive step, along with a simplified GST Registration Scheme for small and low-risk businesses.

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