NEW DELHI: With the imposition of some of the highest tariffs in the region by the United States, India’s textile sector is grappling with a major challenge to its global competitiveness. In response, the textile industry is calling for a rationalisation of domestic tax structures to support this vital sector, which directly employs over 45 million people, making it the largest employment generator after agriculture, particularly in rural areas and among women.
The Northern India Textile Mills Association (NITMA) has urged the Goods and Services Tax (GST) Council to implement a uniform 5% GST rate on key inputs in the man-made fibre (MMF) value chain. NITMA has specifically demanded that the GST on Polyester Staple Fibre (PSF), both virgin and recycled, as well as on Polyester Spun Yarn (PSY), be reduced to 5%.
India’s apparel sector, which includes both knitted and woven garments, contributes nearly one-third of the total exports to the United States. Textiles make up nearly 50% of total Indian exports to the US. However, these categories are currently subjected to extremely high import tariffs.
The export revenue from knitted apparel stands at USD 2.7 billion, the same as that from woven apparel, while textiles made-ups contribute an additional USD 3 billion. Tariff rates on these exports are steep, 63.9% for knitted apparel, 60.3% for woven apparel, and 59% for textiles made-ups, significantly eroding India’s price competitiveness in the US market.
Ahead of the GST Council meetings scheduled for 3–4 September 2025, NITMA President Sidharth Khanna highlighted the urgency of addressing the inverted duty structure impacting the MMF segment.
“The GST rate on PSY must be reduced from 12% to 5% to align with fabric, which is already taxed at 5%. Additionally, the rate on PSF should be brought down from 18% to 5%, as the inverted duty anomaly is rendering the spinning industry increasingly unviable,” Khanna stated.
The current GST structure, Khanna added, is causing severe working capital blockages due to delays in input tax refunds. This has led to increased costs for new investments, revenue losses for state governments, and a rise in unfair competition. Moreover, the system creates unnecessary administrative burdens and opens the door to inspector raj during the refund process.
The industry hopes that the upcoming GST Council meetings will address these concerns and help restore the textile sector’s competitiveness on the global stage.