Surat Weavers Stare at Heavy Burden After GST Cut on MMF Fabrics

Surat | Gujarat — The 56th meeting of the GST Council has delivered a shock to Surat’s textile industry, as GST on man-made fiber (MMF) fabrics has been slashed from 12 percent to 5 percent. What sounds like a relief on paper has turned into a financial nightmare for the city’s weaving community, which produces the bulk of India’s synthetic fabrics.

Surat, known as the hub of MMF production, contributes nearly 60 percent of India’s output. With more than 55,000 powerloom weavers producing around 6 crore meters of polyester fabric daily, the numbers quickly translate into a crushing new tax liability.

Industry estimates suggest weavers will now need to shell out ₹2.52 crore per day in GST, adding up to nearly ₹919 crore annually. Until now, weavers were exempt from paying GST, but under the new system effective September 22, they must pay up to 75 paise per meter of fabric.

Working Capital Crunch

The shift has sent shockwaves through Surat’s weaving clusters, where payment cycles typically stretch from 90 to 120 days. The mismatch between GST payments and cash inflow is expected to worsen liquidity.

“Weavers will have to pay GST every month while their payment cycle is 90 to 120 days. To meet this gap, working capital will have to be increased, which will also fuel panic selling,” said Ashish Gujarati, President of Pandesara Weaving Co-operative Society.

Industry Feels Betrayed

Weavers had long demanded that 18 percent GST be levied on yarn and 5 percent on fabrics and garments, a structure they believed would balance the supply chain. Instead, their demand was ignored, leaving them to carry a fresh burden.

“This change will increase difficulties for weavers. The expectation was that yarn would be taxed higher and cloth lower. Instead, with the refund system gone, weavers will now struggle to pay GST every month,” said Nikhil Madrasi, President of SGCCI.

The Southern Gujarat Chamber of Commerce and Industry (SGCCI) has already decided to escalate the matter. “These changes will not be accepted. We will make a representation to the central government soon,” said Ashok Jirawala, Vice President of SGCCI.

The Mathematics of the Tax

To put the numbers in perspective, 100 kg of MMF yarn priced at ₹10,500 attracts ₹575 GST at 5 percent, making the cost ₹11,075. From this, around 1,000 meters of cloth are produced, sold at ₹20 per meter. The fabric worth ₹20,000 will attract a GST of ₹1,000, of which ₹575 is adjustable against yarn tax. The weaver still ends up paying ₹425 per 1,000 meters—a significant cost given the volume Surat handles daily.

A Cloud Over the Loom City

As one of the largest employers in Surat, the powerloom sector fears the GST change could lead to job losses, rising production costs, and declining competitiveness. With the festive season ahead, industry voices warn that the decision could choke a sector already battling thin margins.