The Northern India Textile Mills Association (NITMA) has urged the Union Finance Minister and the GST Council to resolve the inverted duty structure (IDS) plaguing India’s man-made fibre (MMF) textile value chain, warning that failure to act could lead to widespread closures and job losses.

NITMA President Sidharth Khanna, in a representation submitted ahead of the GST Council’s meeting on September 3–4, highlighted that while the cotton textile chain enjoys a uniform 5% tax rate, the MMF segment faces a distorted structure that undermines domestic manufacturing.

Under current rates, polyester staple fibre is taxed at 18%, polyester spun yarn at 12%, while fabrics and garments under ₹1,000 attract just 5%. “This imbalance makes spinning operations financially unsustainable. Yarn cannot be taxed at 5% while fibre remains at 18%—it threatens the very existence of the MMF industry,” Khanna said.

The association has proposed a rationalized 5% GST across the MMF chain, covering polyester staple fibre, polyester spun yarn, fabrics, and garments. According to NITMA, such parity would eliminate the inverted duty burden, simplify compliance, and bring MMF taxation in line with cotton.

Currently, units in the MMF sector are forced to block nearly 5–6% of their annual turnover in pending GST refunds, leading to higher interest costs on locked capital and deterring fresh investment. “Complex refund procedures and regulatory burdens only add to the distress. At the same time, imported yarns are gaining an unfair advantage, undermining Make in India,” Khanna noted.

Industry at a crossroads

NITMA warned that without intervention, the imbalance could force many spinning units to shut down, triggering large-scale job losses in one of India’s most employment-intensive industries. The association stressed that correcting GST rates would also strengthen India’s position in global textile trade at a time when the industry is already facing headwinds from U.S. tariffs.

“This is a defining moment for India’s textile sector,” Khanna said. “Fixing the inverted duty structure will not only safeguard jobs and investments but also unlock growth and resilience across the MMF value chain.”

As the GST Council prepares for its deliberations, the textile industry is pinning its hopes on a decision that could determine the future trajectory of the MMF segment.

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