The Indian textile sector is poised for potential changes as proposals for GST rate cuts and threshold adjustments are set to be discussed at the upcoming GST Council meeting scheduled for September 3-4. These proposals, if approved, could significantly impact various segments of the textile industry and related stocks.

Proposed GST Rate Reductions

Several key textile products are under consideration for GST rate cuts:

• Synthetic Filament Yarn
• Sewing thread
• Gimped Yarn
• Metalised Yarn
• Rubber Thread

For these products, the GST rate is proposed to be reduced from 12% to 5%. Additionally, carpets and gauze are also expected to see a similar reduction from 12% to 5% GST.

Readymade Garments: Threshold Adjustment and Rate Change

A significant proposal involves readymade garments:

• The threshold for garments attracting 5% GST is proposed to increase from ₹1,000 to ₹2,500.
• Garments priced above ₹2,500 would be subject to 18% GST, up from the current 12%.

This change could have substantial implications for pricing strategies and consumer behavior in the readymade garment segment.

Impact on Textile Stocks

The news of these potential GST changes has already begun to influence the stock market:

• Vardhman Textiles shares experienced a notable jump of 13% on Thursday.
• Other stocks that could be affected include Arvind, Aditya Birla Fashion, Page Industries, Trent, Vedant Fashions, and Sai Silk.

However, it's important to note that these are currently proposals and will be subject to the GST Council's decision during their September meeting.

Recent Challenges in the Textile Sector

While the proposed GST changes offer a glimmer of hope, the textile sector has faced recent challenges:

• Textile stocks have seen a decline of 15-20% in the past month.
• This downturn is attributed to concerns over higher US export tariffs.
• Companies deriving 50-70% of their revenue from the US market have been particularly affected.

The proposed GST rate cuts and threshold adjustments could potentially provide some relief to the sector, depending on the final decisions made by the GST Council. Stakeholders in the textile industry will be closely watching the outcomes of the September meeting, as these changes could significantly impact pricing strategies, competitiveness, and overall market dynamics in the Indian textile sector.

In a move aimed at bolstering the domestic textile sector, the Indian government has extended the import duty exemption on cotton through December. This decision comes as a response to the challenges faced by the industry, particularly in light of recent tariff impositions by the United States.

US Tariff Pressures

The Trump administration recently implemented an additional 25% tariff on Indian goods, effective from August 27. This new tariff, which comes on top of an existing 25% base rate imposed from August 7, is reportedly in response to India's purchase of Russian oil. The cumulative 50% tariff has placed significant pressure on Indian exporters, particularly those in labor-intensive sectors such as apparel and home textiles.

Government's Supportive Measure

To mitigate the impact of these external pressures and support the textile industry, the Indian government has extended the import duty exemption on cotton. Originally set to expire in September, the exemption will now continue through December. This extension is expected to have several positive effects on the sector:

1. Stabilization of Cotton Prices: By allowing duty-free imports, the government aims to ensure a steady supply of cotton, potentially helping to stabilize prices in the domestic market.

2. Reduced Production Costs: The exemption is expected to lower input costs for textile manufacturers, helping them maintain competitiveness in the face of increased US tariffs.

3. Protection for SMEs: The measure is particularly aimed at supporting small and medium enterprises (SMEs) in the textile sector, which are often more vulnerable to market fluctuations and external pressures.

Industry Response

Representatives from the textile industry have welcomed the government's move, highlighting the challenges they've been facing. They pointed out that elevated cotton prices, coupled with unfavorable duty structures, were undermining the competitiveness of labor-intensive sectors within the textile industry, particularly in apparel and home textiles.

Looking Ahead

While the extension of the import duty exemption provides some relief to the textile sector, the industry continues to face challenges from global market dynamics and trade policies. The effectiveness of this measure in countering the impact of US tariffs remains to be seen, and industry stakeholders will likely be closely monitoring its effects in the coming months.

As the situation evolves, further policy interventions may be necessary to ensure the long-term competitiveness and sustainability of India's textile sector in the global market.