Government cuts GST rates to boost textiles, aims $350 billion industry by 2030

The Government of India has announced sweeping Goods and Services Tax (GST) reforms aimed at transforming the country’s textile industry into a global powerhouse. According to the Ministry of Textiles, these next-generation reforms are expected to play a pivotal role in helping the sector achieve its ambitious target of becoming a $350 billion economy by 2030.

Through the rationalisation of GST rates and the removal of long-standing structural gaps, the government seeks to lower production expenses, stimulate demand, improve affordability, and reinforce the entire textile value chain—spanning from farm to fibre, factory to fashion, and ultimately to global markets.

GST reforms: A historic leap for the textile industry

The Ministry of Textiles has reiterated its pledge to collaborate with exporters, entrepreneurs, artisans, and other industry players to guarantee the effective and seamless execution of these significant reforms.

According to the ministry, the measures will:

• Reduce costs and correct anomalies at the fibre stage

• Improve garment affordability and revive retail demand

• Boost export competitiveness and global presence

• Sustain and create employment opportunities

• Support India’s fibre-neutral growth policy

These reforms are closely aligned with the Prime Minister’s 5F formula—Farm to Fibre to Factory to Fashion to Foreign, designed to establish India as a global leader in textiles.

Key GST rate changes to benefit textile stakeholders

GST relief for affordable garments

Under the revised structure, the 5% GST rate now applies to readymade garments and made-ups priced up to ₹2,500 per piece (previously capped at ₹1,000).

This step will make affordable clothing more within reach for middle-class and economically weaker households. It is also anticipated to stimulate demand across tier-2 and tier-3 cities, along with rural markets.

“Given the labour-intensive nature of garmenting, higher demand will sustain and expand employment, especially for women in stitching, tailoring, and finishing units. The move will also support ‘Make in India’ brands, helping them compete with cheap imports in low and mid-price segments,” the ministry stated.

Correction of inverted duty structure

• GST on fibres has been slashed from 18% to 5%

• GST on yarns has been cut from 12% to 5%

This alignment of fibre–yarn–fabric rates addresses the long-standing issue of working capital blockage for manufacturers, particularly small and medium enterprises.

Since a large portion of man-made fibre (MMF) production comes from SMEs, the reduction will ease cost pressures, improve cash flows, and enhance the global competitiveness of synthetic textiles and MMF garments, helping India become a hub for these segments.

Boost to carpets, floor coverings, and handicrafts

The government has also extended GST relief to traditional and craft-based products:

• Carpets and floor coverings: GST reduced from 12% to 5%—a step that will benefit export clusters such as Bhadohi and Srinagar.

• Handicrafts and handloom products: The GST rate has been reduced from 12% to 5% on 36 handicraft categories, including cotton handloom rugs and handwoven carpets classified under HS 5705.

This move is expected to provide direct relief to artisans, enhance rural livelihoods, and preserve India’s rich craft heritage.

Simplification of compliance and refund process

Along with rate rationalisation, the government has also introduced measures to simplify compliance:

• Refunds in cases of zero-rated supply and inverted duty structure will now be processed through a system-driven risk evaluation mechanism, reducing delays.

• Removal of the ₹1,000 threshold for small consignments sent via courier or postal mode will ease export processes.

• A simplified GST registration scheme for small and low-risk businesses will enhance ease of doing business and reduce compliance burden.

Conclusion

The new GST reforms represent a turning point for India’s textile industry, which employs more than 45 million people and contributes significantly to the country’s export earnings. By addressing structural inefficiencies, making apparel more affordable, and boosting both traditional crafts and modern segments like MMF-based garments, the government has laid a strong foundation for sustainable growth.

If implemented effectively, these reforms could not only help the sector reach the $350 billion target by 2030 but also strengthen India’s position as a global textile powerhouse while creating millions of jobs, especially for women and rural communities.