As per the latest reports, the government is likely to introduce a 12% Goods and Services Tax (GST) across the entire textile sector. The GST council is meeting in September, and this could be one of the significant outcomes of the GST council meeting. If the proposed changes are implemented, will they have a positive or negative impact on the textile industry and textile stocks? To answer that, we need to understand the textile industry in India. Let us get started.
Indian Textile Industry
The Indian textile industry is one of the most significant sectors in the country. It contributes around 2 percent to India’s GDP (Gross Domestic Product), 10% to export earnings, and 7% to industry output. One of the key highlights of this sector is that it is the second-largest employer in India after agriculture. The textile sector in India provides direct employment to around 4.5 crore people and indirect employment to around 10 crore Indians.
What comes under the textile industry? The sector includes the entire value chain – from fiber production (cotton, jute, silk, wool, and man-made fibers) to spinning, weaving, processing, and garment manufacturing. Why should you focus on Indian textiles? Currently, the industry is undergoing modernization, as we see investments in digitization, sustainability, and automation. Also, government initiatives like PLI (Production-Linked Incentive) schemes, MITRA textile parks, and export incentives will boost competitiveness and scale.
Global buyers are seeking China+1 sourcing options, and India can gain by improving infrastructure, labor efficiency, and compliance. The textile industry is moving toward transformation, aiming for export growth and rising domestic demand fueled by higher incomes and urbanization.
Global Textile Industry
Let us also look at the global textile market and see where India stands in the picture. The global textile industry is a huge market worth over $1 trillion, with major players like China, Bangladesh, Vietnam, Turkey, and India. With no surprise, China is the largest exporter, known for its massive scale, low costs, and modern infrastructure. In recent years, Vietnam and Bangladesh have experienced rapid growth, driven by their focus on garments and strong export policies.
Asia has been and remains the production hub, with China leading. But many global brands are now looking to diversify sourcing beyond China (China+1 strategy), which is creating new opportunities for countries like India and Vietnam in the global textile market.
12% Flat GST on Textiles: Ending the Inverted Duty Structure for Industry Growth
- If any sector or industry has to grow, the taxation related to the industry has to be simple. At present, different parts of the value chain are taxed differently. For example, cotton is taxed at 5% (to support farmers), synthetic fibres at 18% and yarn at 12%.
- When it comes to the final product (garments), the taxation is again not simple – garments that are below Rs 1000 are taxed at 5% and those above are taxed a 12% GST. The current uneven tax structure has caused issues for investors and businesses.
- To fix the issue, the GST council may introduce a 12% GST on textiles because the current rate mismatch has caused the “inverted duty structure” problem. It happens when the tax on raw materials is higher than the tax on the final product (like clothes). In India’s textile industry, this started because cotton was taxed at a lower GST rate to help farmers.
- But this created a mismatch — textile businesses now pay more tax when buying inputs and less when selling the final product. This leads to issues such as delayed GST refunds, confusing pricing, and reduced motivation to invest in improved machinery or expand production. So, even though the goal was to support farmers, it has ended up hurting textile manufacturers in the middle of the value chain.
- Simplifying taxes with a flat 12% GST across the textile sector would boost industry growth and make Indian textiles more competitive worldwide. This change would also fix the inverted duty structure, which could attract new investments, particularly in the synthetics and blended fabrics market.
Key Textile Stocks in India
Let us look at the key textile stocks in India. Here are the top 5 textile stocks (companies) based on market capitalization:
- Page Industries is best known as the exclusive licensee of Jockey in India and neighboring countries. Over the years, the company has built a strong brand with a focus on quality, comfort, and premium positioning, becoming a market leader in the organized innerwear segment. The company also holds the license for Speedo swimwear in India.
- KPR Mills: They are one of India’s leading vertically integrated textile companies that deal in yarn, fabric, and garment manufacturing. It has a strong focus on exports, especially to Europe and the US, and has a large capacity for making knitted apparel. KPR also operates one of the largest garment factories in India.
- Vedant Fashions: Have you heard of Manyavar? This company is behind this brand, along with others like Mohey, Mebaz, and Manthan. The company’s core focus is on branded wedding and occasion wear for men and women. The company runs an asset-light model, relying primarily on franchise stores across India and abroad. Known for strong advertising and celebrity endorsements, Vedant has positioned itself as the go-to brand for festive Indian clothing.
- LMW: Not a key player in textile manufacturing, but in textile machinery, especially spinning equipment. It is a critical supplier to Indian and global textile mills, and helps them modernize and become more efficient. Apart from textiles, LMW also operates in foundry and aerospace components, making it a diversified engineering company.
- Trident: Another popular brand among customers! Customers know the company for its home textiles like towels, bedsheets, and paper products. It is among the largest terry towel producers in the world and exports to major global retailers. The company has a vertically integrated model with in-house yarn, fabric, and processing facilities.
| Company | CMP* (Rs) | Market Cap | 5-year returns |
| Page Industries | 45,850 | 51,141 crore | 141% |
| KPR Mills | 1040 | 35,412 crore | 1034% |
| Vedant Fashion | 850 | 18,249 crore | -17.50% |
| LMW | 15,398 | 16,638 crore | -9% |
| Trident | 28.50 | 14,550 crore | 320% |
*as of 5 August 2025
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Please consult a SEBI-registered advisor before investing
Conclusion
The move to implement a 12% flat GST rate on textiles will help to remove the existing inverted duty structure, bring uniformity in taxation, and improve compliance and refund efficiency. While it may increase costs in the short term for some segments, especially in the unorganized sector, it can help create a more formal, investment-friendly, and stable tax environment in the long run. For investors, this tax reform could benefit well-structured and compliant textile companies, making them more competitive and scalable.
If you are looking to capitalize on this GST-driven opportunity, now is the time to identify and invest in the best textile stocks in India with strong fundamentals and growth potential. Jarvis Invest, a trusted share market advisor, offers AI-powered research, in-depth analysis, and actionable short-term recommendations to help you invest confidently and maximize returns from this sector’s transformation.
Frequently Asked Questions
1. What is the primary purpose of introducing a 12% flat GST on textiles?
Ans. The 12% flat GST, when introduced, will fix the inverted duty structure, where tax on raw materials was higher than on finished goods. This move simplifies taxation, reduces refund delays, and promotes ease of doing business for textile companies.
2. Will this GST change lead to higher prices for consumers?
Ans. In the short term, lower-value garments, currently taxed at 5%, may see price increases. However, as the supply chain becomes more efficient and formalized, prices are likely to stabilize. Organized players may benefit, while smaller players may face pressure to adjust.
3. Which textile stocks could benefit from this change?
Ans. Vertically integrated, export-oriented, and GST-compliant companies are likely to benefit more.. Examples include KPR Mills, Trident, Page Industries, and Lakshmi Machine Works, as they can take better advantage of input tax credits and operate more efficiently.
4. What is the textile industry
Ans. The textile industry involves the production and processing of fibers, yarns, and fabrics used to make clothing, home textiles, and other fabric-based products. It includes activities like spinning, weaving, dyeing, and finishing materials for various applications.
