GST 2.0: A Landmark Reform for India’s Economy
The Next-Generation GST reforms (GST 2.0), announced by Prime Minister Narendra Modi on August 15, 2025, and implemented from September 22, 2025, represent the most significant tax restructuring since GST’s inception in 2017.
Garment & Textile Sector Set for Transformation
India’s garment and textile industry, one of the largest employers after agriculture and a cornerstone of exports, is entering a historic new phase with the rollout of GST 2.0.
How GST 2.0 Strengthens India’s Garment Value Chain
For an industry that employs over 45 million people and contributes nearly 2% to India’s GDP, GST 2.0 will bring long-awaited relief, stability, and growth opportunities, reshaping cost structures, improving cash flows, and unlocking fresh demand across domestic and global markets.
GST 2.0 Fuels India’s $350 Billion Textile Vision
By simplifying tax structures, reducing input costs, and removing long-standing anomalies like the inverted duty structure, GST 2.0 paves the way for stronger domestic consumption, healthier margins for manufacturers, and enhanced global competitiveness. The reforms come at an important juncture when India is positioning itself as a global textile hub, with the vision of reaching a $350 billion market by 2030.
GST Rate Rationalisation: What’s New?
- The four-tier structure (5%, 12%, 18%, 28%) is now replaced by just three slabs: 5% (essentials), 18% (standard), and 40% (luxury/sin goods).
- Garments and textile products priced up to ₹2,500 now attract only a 5% GST rate as earlier, the threshold was ₹1,000.
- This overhaul eliminates the previous “inverted duty structure,” where input costs were taxed higher than the finished product, causing inefficiencies and working capital strain for manufacturers.
How GST 2.0 Empowers the Garment Industry
- Man-made fibres, yarn, and finished textile products have all seen rates cut to a uniform 5%, dramatically lowering input and end-product costs throughout the value chain.
- Apparel is now more affordable for India’s middle- and low-income consumers, stimulating demand and supporting stronger domestic and export growth.
- The reforms are expected to:
- Revive demand in Tier-2/3 cities and rural markets.
2. Fuel employment, especially for women, in the labor-intensive apparel sector.
3. Strengthen the competitiveness of Indian garment makers globally, supporting the “Make in India” mission.
- 4. Key industry players including Sportking, Siyaram, Donear, Dollar Industries, Lux, Killer, SNITCH, Wrogn, The Bear House, Banana Club, and Sweet Dreams, will benefit from improved margins and cash flow due to streamlined tax outflows.
Broader Economic Impact
- The GST rationalisation aligns with India’s vision to build a $350 billion textile and apparel market by 2030.
- By correcting long-standing anomalies, the government not only unlocks growth for garment manufacturers, but also ensures consumers get better pricing on daily wear.
- The sector, known for its MSMEs, stands to gain through reduced compliance headaches and more liquidity available for reinvestment and scaling operations.
Conclusion
GST 2.0 marks a turning point for India’s garment and textile sector. By simplifying taxes, reducing costs, and boosting competitiveness, it empowers manufacturers, supports MSMEs, and makes apparel more affordable. With these reforms, India is set to strengthen its position as a global textile hub and move closer to its $350 billion vision by 2030.
