Centre Weighs Integrated Tax Framework To Boost Textile Competitiveness

The Centre is working on an integrated tax framework for India’s textile sector to provide greater tax certainty, ease duty-related costs on raw materials and machinery, and improve manufacturers’ competitiveness in global markets, according to a report by The Economic Times.

The proposal remains under discussion, with no final framework approved or notified. The Department of Revenue is working with the textiles ministry to examine industry requests and assess cost pressures across the production chain, from fibre and yarn to fabric and finished garments.

The proposed framework could bring together a review of goods and services tax on textile products and inputs, basic customs duties on raw materials and imported machinery, and anti-dumping duties on selected man-made fibre and yarn imports.

A coordinated approach would help address the impact of duties across interconnected manufacturing stages. Higher costs for upstream inputs can flow through to weaving, processing and garment production, affecting margins and working capital. Uneven tax rates can also create inverted duty structures, where inputs attract higher taxes than finished products.

The textiles ministry has sought the removal of customs duties on caprolactam, nylon chips, rayon-grade wood pulp and cotton. These materials support key segments of the industry, including nylon, viscose and cotton textiles. Lower duties could ease procurement costs for downstream manufacturers, although the government would also need to consider the implications for domestic raw material producers.

The ministry has separately recommended removing or deferring anti-dumping duties on elastomeric filament yarn and viscose rayon filament yarn, citing their impact on downstream manufacturers, micro, small and medium enterprises, and employment. Any change would require balancing the interests of yarn users with those of domestic producers protected by these measures.

Industry representatives have also requested a six-month basic customs duty waiver on five polyester-chain products: monoethylene glycol (MEG), purified terephthalic acid (PTA), partially oriented yarn (POY), fully drawn yarn (FDY) and drawn textured yarn (DTY). MEG and PTA are key feedstocks for polyester production, while the yarn products serve weaving and knitting operations. The requested waiver remains under consideration.

Imported machinery is another area under review. Industry has argued that investment incentives may deliver limited benefits if manufacturers continue to face high or uneven duties on equipment and production inputs. Lower machinery costs could support technology upgrades, particularly among smaller units in traditional textile clusters.

The discussions complement the Textile Expansion and Employment Scheme announced in the Union Budget 2026–27, which is intended to support machinery upgrades, technology adoption and common testing facilities. ET reported the scheme’s size at Rs 40,000 crore, with rollout discussions underway.

Implementation of the proposed tax framework would require coordination across separate policy processes governing GST, customs and anti-dumping duties. Its eventual impact will depend on the scope of relief, the balance between upstream and downstream interests, and manufacturers’ ability to translate lower costs into investment, productivity and export growth.