GST impact: Textile stocks in focus as govt sets multiple tax rates

The GST Council has decided that under GST, jute & silk would attract nil rate, all categories of yarn would be taxable at 5 percent (excluding manmade yarn which would be liable to 18 percent) and fabrics of all categories would be liable to a tax at 5 percent.

June 05, 2017 / 09:41 IST

26 Aug, 2025 12:21

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On Saturday, the GST Council announced that the rate on textile items will be taxed at 5 percent for all categories of yarn whereas the rate was set at 12 percent for prices above Rs 1000.

Textiles attracted multiple excise rates which depend upon the type of fibre (cotton vs man-made fibre), price (garments above or below Rs 1,000), product (fabrics vs garments) and branding (i.e. branded vs unbranded garments). As regards to VAT, most of the items are exempt from tax or attract tax at 5 percent.

The GST Council has decided that under GST, jute & silk would attract nil rate, all categories of yarn would be taxable at 5 percent (excluding manmade yarn which would be liable to 18 percent) and fabrics of all categories would be liable to a tax at 5 percent. Also, with regards to readymade garments it was decided that the GST rate would be 5 percent, if the price is less than Rs1,000 and 12 percent where the price is more than Rs 1,000.

With this structure, the Government has done a decent job by reducing the multiple categories of rates and keeping the rates close to the current effective tax, says a report by KPMG in India. Also, input tax credit has been allowed (but no refund in case of excess credit), which is a good news. The most desirable situation would have been to have one flat rate for all categories. However let’s not allow ‘Best’ to be the enemy of ‘Good’ and try and proceed with whatever ‘good’ the Government has done so far.

Shares of textile major V-Mart Retail zoomed more than 11 percent at open on Monday as the industry gave a thumbs up to the recently concluded GST Council meet.