With the United States imposing steep tariffs from today (Agust 27^th , 2025), among the highest in the region, India’s textile exporters are bracing for a new wave of competitive pressures. Against this backdrop, the Northern India Textile Mills Association (NITMA) has called on the GST Council to rationalise tax rates across the man-made fiber value chain.

In a statement ahead of the Council’s September 3–4 deliberations, NITMA president Sidharth Khanna urged the government to introduce a uniform 5% GST rate on polyester staple fiber (PSF) and polyester spun yarn (PSY), aligning them with fabrics already taxed at 5%.

Inverted duty structure unsustainable

Khanna pointed out that polyester spun yarn is currently taxed at 12% and staple fiber at 18%, while fabric stands at 5%. The mismatch, he said, has created an inverted duty structure that is draining the spinning sector of working capital and discouraging fresh investment.

“If yarn is taxed at 5% and fibre at 18%, the industry suffers huge blockage of working capital in GST refunds, faces administrative hurdles during claims, loses state-level SGST incentives, and struggles with unutilised input credits on capital goods,” Khanna explained.

Risk of losing ground

NITMA further warned that the anomaly not only discourages domestic manufacturing but also gives an undue edge to imported finished goods, which bypass these inefficiencies. The association cautioned that unless GST is rationalised, India’s textile sector could face higher costs and unfair competition at a time when global conditions are already strained.

Calling the issue “critical,” Khanna appealed directly to the GST Council and said “Decisive action to remove the inverted duty structure will not only counteract the impact of U.S. tariffs but also unlock growth and investment across the MMF value chain. This can ultimately turn today’s challenges into a blessing in disguise.”

With India’s textile industry employing millions and contributing significantly to exports, the plea for GST parity on polyester inputs is likely to be a key talking point when the Council meets next week.

NITMA GST On Polyester Fiber Polyester Spun Yarn US Tariffs Textile Industry Inverted Duty Structure GST Council Meeting Ludhiana