GST 56th Council Meeting: What It Means for the Garment & Textile Industry

The 56th meeting of the GST Council has ushered in one of the most significant structural changes to India’s indirect tax system. For the garment and textile sector—a labour-intensive industry with strong export potential—these reforms are particularly noteworthy. The new rate structure aims to resolve long-standing issues, simplify compliance, and enhance competitiveness.

---

Simplification of Rate Structure

Earlier, garments were taxed under a dual-rate system:

• 5% GST for items priced up to ₹1,000 per piece
• 12% GST for items priced above ₹1,000 per piece

This structure not only created confusion but also led to classification disputes and compliance hurdles. The 56th GST Council Meeting has now collapsed this into a cleaner framework aligned with the broader two-rate GST structure (5% Merit, 18% Standard).

---

Comparative Chart: Old vs New GST Rates on Garments

Category	Earlier GST Rate	New GST Rate (Post 56th Council)	Remarks
Apparel/garments (value ≤ ₹1,000 per piece)	5%	5% (Merit rate)	Retained for affordability; no change.
Apparel/garments (value > ₹1,000 but ≤ ₹2,500 per piece)	12%	5% (Merit rate)	Significant relief; shifted to lower slab.
Apparel/garments (value > ₹2,500 per piece)	12%	18% (Standard rate)	Aligned with standard GST slab for premium apparel.
Handloom, handmade & embroidered shawls, handicraft textiles	Varied (5–12%)	5%	Consolidated under merit rate to support artisans/MSMEs.
Manmade fibre	18%	5%	Correction of inverted duty structure.
Manmade yarn	12%	5%	Correction of inverted duty structure.

---

Key Implications for the Industry

1. Removal of Inverted Duty Structure
• Manmade fibre and yarn brought down to 5%.
• This resolves a major working capital issue and reduces refund dependencies across the textile value chain.
2. Consumer Benefit on Mid-Range Apparel
• Garments between ₹1,000–₹2,500 now taxed at 5% instead of 12%.
• Middle-income consumers will see reduced prices, potentially boosting demand.
3. Premium Apparel Under Standard Rate
• Garments above ₹2,500 per piece now fall under 18%.
• This aligns luxury/premium apparel with the broader standard rate, ensuring clarity and uniformity.
4. Support for Artisans and MSMEs
• Handloom, embroidery, and handicraft textiles consolidated under 5%.
• This directly supports employment and rural livelihood.
5. Boost to Competitiveness
• With input costs rationalised, Indian garments and textiles are better positioned to compete globally, especially in export markets.

---

Conclusion

The GST Council’s latest decisions mark a watershed moment for the garment and textile industry. By addressing inverted duty structures, rationalising garment rates, and supporting artisans, the reforms strike a balance between affordability, industrial growth, and revenue needs. The simplified rate framework is expected to reduce disputes, lower compliance costs, and provide a much-needed boost to both domestic consumption and exports.