REFORMING THREADS: THE ROLE OF GST IN INDIA'S TEXTILE SECTOR

ABSTRACT: The Indian textile industry, a cornerstone of the country’s economy, contributes significantly to employment, GDP, and exports. Historically characterized by a complex and fragmented taxation structure, the sector has faced challenges such as tax cascading, compliance burdens, and lack of uniformity across states. The introduction of the Goods and Services Tax (GST) in July 2017 marked a pivotal reform aimed at unifying indirect taxes under a single, streamlined system. This report provides an in-depth analysis of the impact of GST on India’s textile sector. It examines the pre-GST taxation environment dominated by multiple levies including excise duty, Value Added Tax (VAT), and Central Sales Tax (CST), which resulted in inefficiencies and increased costs. The study then explores how GST has transformed this landscape by implementing uniform tax rates, facilitating seamless input tax credit, and simplifying interstate trade. Through comparative analysis, stakeholder feedback, and secondary data review, the report highlights both the benefits and challenges of GST implementation. While GST has enhanced transparency and encouraged formalization, it has also introduced new complexities—especially for small-scale and unorganized textile producers struggling with compliance and multiple GST slabs applicable to different textile products. The report further assesses GST’s effect on export competitiveness, noting improvements due to streamlined tax credits, yet recognizing ongoing issues such as refund delays and operational bottlenecks. Finally, it offers policy recommendations to optimize GST’s impact, including rationalizing tax rates, easing compliance for micro-enterprises, and providing targeted support for traditional textile sectors. Overall, this study concludes that GST is a transformative tool that has begun to reform the intricate threads of India’s textile industry. However, continued policy attention and adaptive reforms are essential to ensure inclusive growth, enhance global competitiveness, and preserve the sector’s deep-rooted heritage.