Industry Odisha Bureau, Oct 27: The Centre is building an integrated tax framework for India’s textile sector. The aim is greater tax certainty and wider relief on raw material and machinery duties. Officials hope this will sharpen the industry’s competitiveness in global markets. The plan is still being developed, according to people familiar with the talks, ET reported. Nothing has been approved or notified yet.
The framework could cover three separate tools. The first is goods and services tax on textile products and inputs. The second is basic customs duty on raw materials and imported machinery. The third is anti-dumping duty on certain man-made fibre and yarn imports. The idea is to examine costs at every stage of production. That runs from fibre and yarn to fabric and finished garments.
A senior official told ET the government wants a full rethink, not piecemeal tweaks. The Department of Revenue is working with the textiles ministry on industry requests.
Why an integrated approach? Textile production is a long chain of linked stages. A duty on an upstream input raises costs for every stage that follows. Yarn makers pass it to weavers, who pass it to garment exporters. Each step also ties up more working capital. Changing one rate in isolation can shift the burden rather than remove it. It can also create inverted duty structures, where inputs are taxed above outputs. A coordinated review lets policymakers see the whole chain at once.
The push complements an existing investment programme. The Textile Expansion and Employment Scheme was announced in the Budget for 2026–27. It supports machinery, technology upgrades and common testing centres in traditional clusters. ET puts the scheme’s size at ₹40,000 crore. The textiles ministry has begun discussions on its rollout. An allocation, however, is not the same as money spent or projects approved.
The official said industry has made a pointed argument. Investment support may fall short if duties on inputs and machinery stay high or uneven. A modern loom brings little advantage if its yarn costs more than rivals pay.
The textiles ministry has listed several inputs for customs duty removal. They include caprolactam and nylon chips, the building blocks of nylon yarn. Rayon-grade wood pulp, the raw material for viscose, is also on the list. So is cotton, India’s most important natural fibre. Cotton imports have enjoyed a temporary duty exemption from June 1 to October 30, 2026. That window closes this week.
Lower input duties would help spinners, weavers and garment makers. But domestic producers of the same inputs could face tougher import competition. The revenue department must also weigh the loss in customs collections.
Anti-dumping duties raise sharper trade-offs. These are not ordinary tariffs. They follow investigations showing imports are unfairly priced and hurting domestic producers. The ministry wants such duties removed or deferred on two yarns. These are elastomeric filament yarn, used for stretch fabrics, and viscose rayon filament yarn. It cites the impact on downstream manufacturers, MSMEs and jobs. Domestic yarn producers protected by these duties would bear the cost of any change.
Industry has also sought a six-month customs duty waiver on five polyester-chain products. MEG and PTA are chemical feedstocks that combine to make polyester. POY is an intermediate yarn spun from that polymer. FDY and DTY are finished yarns ready for weaving and knitting. Textiles account for roughly 70%–75% of India’s PTA and MEG consumption, an industry body says.
Temporary exemptions on MEG and PTA lapsed in July, ET reports. They had earlier been extended to July 15. Their withdrawal prompted fresh appeals from the sector. The six-month waiver remains only a request.
Machinery is the final piece. The textiles ministry has asked revenue officials to revisit duty costs on imported machines. Higher machine prices raise capital costs and slow technology upgrades. Small units in traditional clusters feel this most, lacking the finances of large integrated mills. Cheaper machines can enable productivity gains, but do not guarantee them.
The stakes are significant. Textiles support more than 45 million jobs, according to ET. The sector contributes about 9% of merchandise exports. It accounts for roughly 2% of GDP and 11% of manufacturing gross value added. Those are jobs the sector supports, not jobs any reform would create.
Competition is intense, especially in man-made fibre textiles and apparel. Industry players point to China, Bangladesh and Vietnam as key rivals. Raw material costs matter in that contest. So do scale, productivity, logistics and access to export markets. Tax reform can ease one constraint, but not all of them.
Implementation will not be simple. GST rates are set through the GST Council, where states have a say. Customs duties fall to the finance ministry. Anti-dumping duties follow a separate trade-remedy process. Aligning all three requires coordination across institutions with different mandates.
The framework’s value will depend on its final design. Relief must be balanced between upstream producers and downstream users. Revenue losses must be weighed against gains in output and exports. Done well, it could give manufacturers the predictability needed for long-term planning. It could also help in enhancing India’s position in global textile markets. The real test will come in investment, output and export data.
