1. GST Rationalisation: A Structural Correction Long Overdue
- PTA & MEG (raw materials): 18% GST
- MMF yarn: 12% GST
- Fabric: 5% GST
This anomaly forced fabric manufacturers to continuously file for GST refunds, blocked working capital, and discouraged investment in downstream garmenting.
That changes now.Effective 22 September 2025, the Government has introduced a uniform 5% GST rate across man-made fibres, yarns, and most fabric categories. Ready-made garments up to ₹2,500 now also attract 5%, while higher-priced apparel stays at 18%.
This rationalisation: Eliminates the inverted duty structure
- Improves cash flow for weavers and processors and the chain.
- Makes downstream production more tax-efficient
- Increases revenue from fabric and apparel transactions that were earlier undermined by low slabs
This reform alone tilts the economics in favour of fabric and garment manufacturing.
2. Withdrawal of QCOs: A Major Boost for Raw Material Access & Competitiveness
QCOs restricted imports only to BIS-certified suppliers—adding delays, compliance cost, and restricting global sourcing flexibility. Domestic mills often paid a 10–30% premium compared to global rates simply to stay compliant.
With QCOs gone: Raw material imports are BIS-free
- Sourcing widens globally
- Input costs fall sharply
- MSMEs escape heavy compliance burdens
- Exporters regain cost competitiveness
Early industry estimates suggest that in MMF-heavy clusters like Surat, this move could lead to a 15–22% drop in yarn input costs, directly improving fabric and garment margins.
When both reforms — GST simplification and QCO withdrawal are combined,the industry incentive structure changes dramatically with push towards value addition.
Lower production costs → more viable fabric/garment units
Cheaper PTA/MEG and MMF yarn, lower GST outflows, and better cash rotation make downstream investment more attractive.
Better export competitiveness for synthetic base fabric and garments with global price benchmarks, enabling stronger penetration in the US/UK/EU/Japan markets.
Level playing field within India
Cotton and MMF chains now have more balanced tax structures, supporting a unified and modern industry.
Strong push for MSME expansion from yarn trading to weaving, processing, and garmenting with less compliance hurdles and reduced raw material cost.
3. Higher GDP & employment potential :
- Surge in cheaper imports, especially from China & East Asia, may pressure domestic upstream producers of PSF/PFY/POY.
- Export growth depends heavily on global demand cycles and compliance with foreign buyers’ standards.
- Downstream competition will intensify — margins will favour those with scale, quality, and operational efficiency.
Conclusion :
Together, these reforms create a clear, deliberate push by the Government to reshape India from a yarn-heavy, commodity-driven market into a value-added fabrics and garments powerhouse — exactly where global competitiveness and export potential truly lie.
India’s textile future is no longer upstream.
The momentum — and the money — is clearly moving downstream.