The Indian textile industry, particularly units involved in recycling PET and producing polyester fibre, is currently grappling with a major issue stemming from the recently adjusted GST rates. While the overall textile sector benefits from a 5% GST, crucial raw materials for man-made fibres (MMF) — such as Purified Terephthalic Acid (PTA), Mono Ethylene Glycol (MEG), and PET scrap — are subjected to a significantly higher 18% GST. This discrepancy creates what is known as an ‘inverted duty structure,’ posing considerable challenges for manufacturers.
B.P. Sultania, former president of the All India Recycled Fibre and Yarn Manufacturers Association, highlighted the severe impact on the PET bottle recycling industry, which boasts an impressive monthly capacity of 125,000 tonnes. A substantial portion of this recycled PET fibre is vital for the textile sector. However, with PTA and MEG taxed at 18%, the industry faces considerable obstacles. A lengthy refund process will lead to substantial capital being tied up, posing a particular threat to Micro, Small, and Medium Enterprises (MSMEs).
R.K. Vij, Secretary General of the Polyester Textile Apparel Industry Association, pointed out a critical flaw: despite efforts to correct the inverted duty structure within the MMF-based polyester industry, the two primary raw materials, PTA and MEG, remain at the 18% GST rate. This effectively creates an even greater inversion, as finished products like fibre, filament, and yarn have seen their GST reduced from 12% to 5%.
This imbalance is projected to freeze an estimated ₹2,000 crore to ₹3,000 crore in working capital for the downstream textile industry, primarily due to delayed GST refunds. It’s important to note that approximately 80% of PTA and MEG are utilized in various MMF textile applications, including virgin and recycled fibre, yarn, filament, fabrics, and garments. The remaining 20% goes into PET bottles and polyester film packaging, which, in turn, are often recycled back into the textile industry as fibre and filament.
Therefore, industry leaders assert that aligning the GST rate on these essential MMF raw materials with the 5% rate applied to finished textile products is crucial for sustainable growth and a level playing field.