GST rationalisation tilts textile sector towards man-made fibres

• Industry sees 5-7% shift from cotton to MMF within a year
• Further steps sought to resolve raw material cost disparities

India’s textile industry has welcomed the government’s GST rationalisation move, calling it a major reform that could correct long-standing structural imbalances between cotton and man-made fibres (MMF). With the new tax structure lowering rates on MMF and related segments, industry leaders predict a decisive shift in consumption patterns, improved export competitiveness, and greater diversification in product offerings.

Mr. Atul Ganatra, President of the Cotton Association of India, while speaking at a BigMint webinar on “India’s textile industry: GST impact and harvest season outlook,” said the GST cut “will benefit the entire textile industry,” adding that a 5-7% shift from cotton to MMF could take place within a year. Grasim Industries, a major player in viscose, has projected a 5% rise in viscose fibre consumption in the next year and up to 15% growth in three to four years.

According to Ganatra, India’s cotton consumption currently stands at around 310 lakh bales, but recent tariffs and price pressures have already reduced consumption by 2-3 lakh bales a month. “Cotton spinning mills, especially in the southern region, are running at a loss. Smaller mills with fewer than 10,000 spindles may shift to polyester and viscose where production costs are significantly lower post the GST rationalisation,” he said.

There are two reasons for this possible shift. One, the economics are compelling. Polyester costs around INR 100/kg and viscose INR 140/kg, compared with clean cotton at INR 205/kg. Second, MMF requires much lower working capital and stockholding. “To run a cotton mill, you need at least 32–45 days’ stock. For polyester or viscose, one week’s stock is enough, with faster sales cycles and less risk of losses,” Ganatra explained. He added that global trends favour MMF, which makes up 70% of fibre use worldwide, compared to just 35% in India. “With this relief and possible duty cuts, we could move to a 50:50 ratio within three to four years,” he added.

Ms Chandrima Chatterjee, Secretary General, Confederation of Indian Textile Industry (CITI), another panelist, noted that the rationalisation had been “unanimously welcomed” across the value chain, not just by MMF players. She argued that the reduction would boost overall consumption, especially in apparel and made-ups, where high GST had dampened demand. “Global demand is dominated by blends, not pure cotton. This step enables India to diversify into higher-value categories like performance wear, winter wear, formal wear and technical textiles,” she said.

Challenges and enablers

However, challenges remain. Chatterjee highlighted continued tax inversions, with MMF raw materials and textile machinery still attracting 18% GST, creating working capital blockages. “The ideal scenario is a single rate that resolves inversion, reverse charge and other pending issues. This reform is a big step forward, but more is expected,” she added.

Both speakers agreed that aligning Indian fibre prices with global levels is critical. “Polyester and viscose remain more expensive here than in China, limiting our competitiveness,” Ganatra warned. Yet, with jobs and exports at stake, the industry sees the GST reform as a crucial step toward restoring balance and driving long-term growth.