GST Refund Relief For Textile Units, CITI Seeks MMF Rate Cut

The GST Council has approved changes to registration and refund procedures, offering potential working capital relief to textile manufacturers and exporters. The Confederation of Indian Textile Industry (CITI) welcomed the move but sought further rate rationalisation on raw materials used in man-made fibre production.

The Council approved refunds of accumulated input tax credit on plant and machinery for exporters and businesses facing an inverted duty structure, where taxes on inputs exceed those on finished products. Refunds will be calculated at one-sixtieth of the eligible credit for each month. The provision will cover credit availed on or after April 1, 2027.

For textile units, the move could release funds locked in capital goods credit and reduce borrowing costs. Faster refunds are also expected to help manufacturers manage inventories and meet export commitments.

CITI said the decision addresses a longstanding industry demand. However, it urged the government to rationalise GST rates on purified terephthalic acid (PTA) and monoethylene glycol (MEG), key inputs for man-made fibres. The industry body said this would remove the remaining duty inversion and make the MMF value chain tax-neutral.

The Council referred to a committee a separate proposal to allow businesses to claim input tax credit when suppliers collect GST but fail to deposit it with the government.

Uttar Pradesh finance minister Suresh Kumar Khanna said the Council had also approved changes involving the removal of arrest powers under GST laws and higher prosecution thresholds. The measures form part of a wider effort to simplify compliance and make tax enforcement more proportionate.