Indian industry voices concerns over proposed GST hikes on garments

The Confederation of Indian Textile Industry (CITI) has warned of potentially extensive impacts on the textile sector, employment, and the broader economy, while the Clothing Manufacturers Association of India (CMAI) has emphasised the severe effects on manufacturing, pricing, and consumer demand. Additionally, the Retailers Association of India (RAI) expressed concerns that the changes could significantly affect both the formal retail sector and consumer sentiment.

Under the new framework, garments priced up to ₹1,500 will remain subject to a 5 per cent GST. However, those priced between ₹1,500 and ₹10,000 will see a substantial increase to 18 per cent, while garments exceeding ₹10,000 will be taxed at the highest rate of 28 per cent.

"Higher taxes on garments tied to celebrations and festivals will slow down consumption at a time when demand is already under pressure. This could have a ripple effect on the economy, and the textile sector is a cornerstone of India’s economy, providing livelihoods to millions. Policies must nurture its growth rather than create hurdles," said Rakesh Mehra, chairman, CITI.

CITI has also flagged the persistent issue of an inverted duty structure (IDS) in the man-made fibre (MMF) segment, where varying GST rates across the value chain block working capital and stifle growth.

CITI reiterated its previous recommendations to reduce GST rates on raw materials such as purified terephthalic acid (PTA) and monoethylene glycol (MEG) from 18 per cent to 12 per cent, which would ease the IDS issue in the MMF sector without impacting government revenues. CITI fears that the proposed hike will disrupt the formal retail sector, driving consumers and businesses toward informal and unregulated channels.

The textile industry, already facing economic strain, stands to lose several jobs, particularly in small and medium enterprises (SMEs) involved in spinning, weaving, and garment manufacturing.

CITI said in a statement that the proposed GST hike is expected to heighten price inflation, disproportionately affecting price-sensitive consumers. CITI has urged the government to reconsider the proposed GST rate hike and adopt a balanced approach that fosters growth in the textile sector while ensuring consumer affordability.

Santosh Katariya, president of CMAI, expressed grave concerns over the proposed GST rate revisions. “The proposed GST rate revisions pose a significant threat to the apparel industry, which is already facing challenges like a drop in consumer demand and profit erosion.” He urged the government to maintain a uniform 5 per cent GST rate, highlighting its role in stabilising the industry and supporting growth without impacting GST collections.

Rahul Mehta, chief mentor of CMAI, said, “Policies should be designed to nurture the industry, ensuring a balanced approach that fosters growth and stability. The government must consult industry stakeholders to fully understand the implications and avoid further challenges before making decisions. The government's commitment to ease of doing business should reflect in their actions, supporting with policies that drive growth, reduce obstacles, and help the industry to thrive.”

CMAI urged the government to discard the proposed GST rate revisions. While the intent to streamline the tax structure is recognised, it is crucial that policy changes should only strengthen the apparel industry’s growth and stability.

Kumar Rajagopalan, CEO of the RAI, said, “Increasing GST rates will hurt formal retail businesses and encourage unorganised markets to grow. This could undo the progress made in formalising businesses under the GST regime. To boost GST collections, the focus should be on lowering rates and improving compliance, not raising taxes that burden consumers and disrupt the retail sector.”

Fibre2Fashion News Desk (KUL)