Since the introduction of GST in 2017, the man-made fibre (MMF) value chain was fragmented with different rates at each stage. Creating an inverted duty structure. Industry players consistently flagged this as a drag on working capital, profitability, and competitiveness.
In 2022, the government attempted to correct this by introducing a uniform 12% GST across the man-made fibre value chain. While that move simplified compliance, it raised the tax rate for fabric and apparel, sparking tension from both manufacturers and consumers.
But the move triggered protests, especially from MSMEs and traders, since it would raise the tax burden on low-value apparel and fabrics (which were at 5%). On December 31, 2021, just before the implementation date, the government rolled back the hike for textiles and restored the earlier structure.
This meant the inverted duty continued. Now fast forward to September 2025, in a major shift, the government has opted for a more industry-friendly solution. Fibre and yarn GST have been slashed to 5%, aligning them with fabric, which continues at 5%.
With effect from September 22, 2025, the entire man-made textile chain from fibre to yarn to fabric, will operate under a uniform 5% tax structure.
