Clothing Manufacturers Thank PM Modi For GST Reforms, Urge Reconsideration Of One Textile Industry Issue

Mumbai: The Clothing Manufacturers Association of India (CMAI), in a letter to Prime Minister Narendra Modi, has expressed gratitude for introducing reforms in the Goods and Services Tax (GST), calling it game-changing.  Thanking the prime minister for taking measures to ease tax liabilities from the common people by significantly reducing GST rates on various products. However, the association has also raised concerns about a specific issue affecting the textile sector. The CMAI has requested Prime Minister Modi's attention to the GST rate on garments priced above Rs 2500, urging him to place the entire garment sector under the 5% slab instead of the proposed 18% rate.

CMAI President Santosh Katariya, in his letter to PM Modi, asserted that the current proposal to tax garments above Rs 2500 at 18% GST will have an adverse impact on the industry. The association believed that the move would affect the common man, as most quality garments manufactured under strict quality parameters and socially compliant manufacturing standards are priced above Rs 2500. Additionally, woollen clothing will become a bit costlier due to the GST switch. 

The CMAI pointed out that the garment sector was hit hard during the Covid-19 pandemic and is now struggling due to the US tariff tensions. The association stated that imposing a higher GST rate will further affect the situation and could possibly lead to job losses and industry decline. The association asserted that textiles are items of mass consumption and essential commodities, and a uniform 5% GST rate for the entire sector would be beneficial.

The CMAI has urged the government to reconsider the GST rate hike on garments and instead adopt a uniform 5% GST rate for the entire garment sector, suggesting that the move will strengthen stability across the value chain without reducing GST collections. 

Woollen Clothing To Become Costlier

The CMAI outlined that woollen clothing, an essential product in North India, North East, and East India, will become more costly due to the GST hike. They argued that good-quality sweaters and jackets, which are worn by both the middle class and the affluent class, are unlikely to be available below Rs 2500, except for second-hand clothing or smuggled imported clothes. The decision, they claimed, will further impact the struggles of the Ludhiana-based industry, which is already reeling under the pressure of cheap Chinese and Bangladeshi winter clothing.

The association also pointed out that traditional Indian clothing, such as kurtas and pyjamas, will be charged at 18% GST, while garments made from modern, machine-made fabrics will be charged at 5%. 

The CMAI president stressed that the new GST will unfairly penalise consumers who want to proudly wear traditional Indian clothing. Similarly, Indian ethnic clothing, largely worn during festivals and weddings, will also be subjected to the higher GST rate, making it more expensive for consumers.

Job Losses And Informalisation

The CMAI added that the GST hike could also lead to job losses, particularly in the small and medium-sized enterprises (SMEs) that operate on thin profit margins. They hinted that the higher GST rate will prompt several players to revert to the informal sector, undermining the government's efforts to formalise the industry.

Citing various reasons, in his letter, the CMAI President urged the government to adopt a uniform 5% GST rate for the entire garment sector, arguing that this will strengthen stability across the value chain without reducing GST collections. He suggested that by placing the entire garment sector under a uniform 5% GST slab, the government can help mitigate the adverse effects of the GST and support the textile industry's recovery. 

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