GST 2.0 support for textile and fertiliser sectors as Trump’s 50% tariff comes into effect

The Indian government is preparing a new round of GST reforms under the GST 2.0 framework, aimed at supporting sectors impacted by the 50% US tariff on Indian exports. Key industries like textiles and fertilisers are expected to benefit the most from these changes, which focus on easing costs, improving competitiveness, and addressing long-standing issues like inverted duty structures. The reforms come at a crucial time, as exporters face global headwinds and domestic production sectors seek relief.

Textile Sector Set for GST Cuts

The textile industry is poised to gain significantly from the upcoming GST rationalisation. The fitment committee has recommended steep cuts in GST rates across several categories:

• Woven fabrics of cotton, man-made fibres, and wool.

• Apparel and hosiery products.

• Blended textiles.

The proposed rate for these items is 5%, down from higher current slabs. Industry experts argue that existing GST structures burden small weavers, garment manufacturers, and powerloom operators because tax on raw materials often exceeds that on finished goods.

Lowering GST rates will help:

• Reduce working capital blockage.

• Ease cash flow pressures for manufacturers.

• Make Indian textiles more competitive globally, especially amid US tariff challenges.

Fertiliser Industry to See Rate Reductions

The fertiliser sector is another focus of GST 2.0 reforms. The government is considering cutting GST on key inputs:

• Urea

• Diammonium phosphate (DAP)

• Muriate of potash (MOP)

• Single super phosphate (SSP)

• Complex fertilisers

The proposed reduction is from 12% to 5%, which is expected to:

• Lower production costs for fertiliser manufacturers.

• Reduce subsidy burdens for the government.

• Make essential farm inputs more affordable for farmers.

Additionally, this move resolves inverted duty issues, where raw materials are taxed more heavily than finished products, causing refund delays and financial strain for businesses.

Broader GST Rate Rationalisation

Beyond textiles and fertilisers, the GST Council’s 56th meeting on 3–4 September in New Delhi is expected to approve several consumer-friendly reforms, including:

• Expanding the nil rate slab.

• Lowering rates in the 12% slab.

• Reducing taxes on select 18% goods.

Proposed changes for food products include:

• UHT milk, pre-packaged paneer, pizza bread, khakhra, chapati, and roti moving to zero GST.

• Paratha and parotta previously taxed at 18%, also likely to be included in the nil-rate category.

Education-related products may see similar benefits:

• Maps, atlases, wall charts, globes, hydrographic charts.

• Exercise books, graph books, laboratory notebooks.

• Pencils, crayons, pastels, pencil sharpeners, tailor’s chalk, drawing charcoals.

These changes aim to ease household expenses, support students, and make the indirect tax system simpler and more transparent ahead of the festive season.

Strategic Impact of GST 2.0 Reforms

The reforms under GST 2.0 are expected to:

• Strengthen export competitiveness for textiles in global markets.

• Reduce operational costs for fertiliser companies, benefiting farmers.

• Support consumer affordability and ease festive spending pressures.

• Simplify GST compliance and reduce delays caused by inverted duty structures.

If approved, these measures will be implemented across sectors, reinforcing the government’s commitment to economic growth and sector-specific support.

Next Steps

The final decision on the GST 2.0 proposals will be made during the GST Council meeting in New Delhi next week. Once approved, these measures will be rolled out to strengthen both industrial production and consumer relief, marking a significant step in the rationalisation of India’s GST framework.