Centre Proposes Uniform 12% GST Across Textile Sector To Fix Inverted Duty Structure
The GST Council may soon consider a proposal to impose a uniform 12% Goods and Services Tax (GST) across the entire textile value chain before September, as part of the next phase of tax reforms, a senior government official told Moneycontrol.
Currently, cotton is taxed at 5%, yarn at 12%, and synthetic fibres and their raw materials at 18%. Garments priced below Rs 2,000 attract 5% GST, while those above are taxed at 12%. This mismatch has led to pricing distortions, refund delays, and working capital strain.
“The existing farm-produce logic for cotton at 5% no longer works in the GST context,” a senior official said. “Bringing all inputs and outputs to 12% will clean up the structure, reduce hidden costs, and support investment.”
The proposal, supported by the Centre and likely to be included in the Group of Ministers’ rate rationalisation report, also recommends removing the Rs 2,000 price threshold on garments and applying a flat 12% GST on all apparel.
Synthetic textiles, widely used in mass consumption, face the steepest tax burden today. The government argues a uniform rate will simplify compliance, reduce refund dependency, and enhance India’s textile export competitiveness.
A final decision is expected before the next GST Council meeting, likely by September.
