GST rate on PSY must be reduced from 12 to 5 per cent (to align with fabric which is already taxed at 5 per cent), and PSF from 18 to 5 per cent as otherwise the inverted duty anomaly will become unworkable for the spinning industry.
With the onset of embargo-like tariffs imposed by the United States—among the highest in the region—India’s textile sector faces a formidable challenge in maintaining its global competitiveness. In response, the Northern India Textile Mills Association (NITMA) has urged the GST Council to implement a uniform 5 per cent Goods and Services Tax (GST) rate on key inputs in the man-made fibre (MMF) value chain.
Speaking ahead of the upcoming GST Council deliberations scheduled for September 3–4, 2025, Sidharth Khanna, President, NITMA, emphasised the urgent need to eliminate the inverted duty structure currently affecting the MMF segment. He called for a rationalised GST rate of 5 per cent on the following items:
- Polyester Staple Fibre (Virgin & Recycled) – HSN 55032000
- Polyester Spun Yarn – HSN 55092100 & 55092200
GST rate on PSY must be reduced from 12 to 5 per cent (to align with fabric which is already taxed at 5 per cent), and PSF from 18 to 5 per cent as otherwise the inverted duty anomaly will become unworkable for the spinning industry.
He highlighted that if yarn is taxed at 5 per cent and fibre at 18 per cent, then the following burdens will fall on the industry:
- Huge Blockage of working capital in GST refunds.
- Administrative hurdles and Inspector Raj issues during refund claims.
- Higher cost of fresh investment as input tax credit of 18% on capital goods remains unutilized.
- Loss of SGST incentives offered by state governments.
- Unfair competition from imported finished goods that bypass these inefficiencies.
Khanna concluded with a strong appeal to the GST Council, “This is a critical moment for India’s textile sector. Decisive action to remove the inverted duty structure will not only counteract the impact of U.S. tariffs but also unlock growth and investment across the MMF value chain, thereby ultimately making this event a blessing in disguise.â€