From Benares to Pochampally, GST 2.0 is a death knell

Higher taxes on handlooms will kill jobs, shrink markets, and erase centuries of craft tradition. India’s handlooms are more than just fabric — they are living heritage, rural livelihoods, and a symbol of self-reliance.

But GST 2.0’s higher tax rates could push them to the brink. By raising GST on sarees above Rs 2,500 from 12 per cent to 18 per cent, this reform risks silencing looms, erasing traditions, and undermining an industry that has endured for centuries.

From the ghats of Benares to the villages of Pochampally, India’s handloom sector is a living museum of our culture. Every saree is more than cloth — it’s a tapestry of history, skill, and community pride. For centuries, handloom weaving was never taxed. Now, GST 2.0 threatens to end that tradition, not by design, but by a silent, devastating squeeze.

A change that feels like a betrayal

From September 22, the GST system will shrink to mostly two slabs — 5 per cent and 18 per cent. For most industries, this is a tax simplification exercise. For handlooms, it is an existential threat.

An authentic handloom saree — whether it is a Kanchi, Benares, Pochampally, Dharmavaram, Venkatagiri, or Gadwal — cannot realistically be priced under ₹2,500. The costs of natural yarn, dyes, labour, and traditional techniques make it impossible. Under the new GST rules, anything above ₹2,500 attracts 18 per cent GST — up from the current 12 per cent.

For weavers who already compete against cheaper, machine-made imitations, this is a body blow. It will push handlooms out of reach for many Indian consumers, turning them into boutique curios for the wealthy and driving ordinary buyers toward synthetic substitutes.

Rewarding the wrong players

The contrast could not be starker. While taxing authentic handlooms higher, GST 2.0 reduces the tax on artificial yarn from 12 per cent to 5 per cent. This makes polyester sarees, mass-produced in Surat and sold by the kilo, even cheaper. The playing field isn’t just uneven — it’s tilted steeply against the weaver.

This is not just a market shift; it’s a policy choice that favours automated, energy-intensive, job-poor production over eco-friendly, rural, employment-rich handlooms. Natural yarn production supports lakhs of farmers, spinners, dyers, and weavers. Artificial yarn production supports far fewer jobs and carries an environmental cost that is rarely counted.

The numbers tell the story

The GST base for handlooms is only around 1.2 per cent — a statistical rounding error in national revenue terms. The money raised by taxing handlooms at 18 per cent will be negligible. But the damage will be irreversible.

Higher prices will mean fewer sales. Fewer sales mean less production. Less production means shuttered looms and families abandoning weaving altogether. Once a weaver leaves the craft, the knowledge is often lost forever. In just a generation, centuries-old skills can disappear.

Before GST, the sector was already struggling. It relies on ₹35,000 crore of private moneylender credit at punishing interest rates of 18–24 per cent. Annual input costs are massive — ₹25,000 crore for cotton yarn and ₹9,500 crore for dyes and chemicals. Public investment, by contrast, is paltry — just ₹604 crore in 2017-2018, a mere 0.003 per cent of the Union Budget. The new GST burden will squeeze a sector that is already starved of support.

The cultural and economic loss

When we lose handlooms, we don’t just lose jobs. We lose design traditions unique to each region. We lose the locational diversity of production that keeps rural economies alive. We lose the dignity of work that is creative, skill-based, and environmentally sustainable.

We also lose soft power. Indian handlooms are global symbols of heritage and craftsmanship. Turning them into niche export items because the domestic market collapses is economic folly.

The hypocrisy of policy

This is happening at a time when political speeches glorify ‘Vocal for Local’ and ‘Atmanirbhar Bharat’. Prime Minister Narendra Modi has praised the ‘fragrance’ of indigenous products and the sweat of Indian workers. Yet GST 2.0 risks taxing that fragrance out of existence.

How can we speak of self-reliance when we make our own heritage unaffordable, while cheap synthetic alternatives thrive? How can we call for sustainability when we incentivise synthetic fibres over natural ones?

What needs to be done

The GST council still has a chance to correct this course. It must restore the nil rate for handlooms, or at the lowest slab, thereby keeping them affordable for ordinary Indians. Also, since most sales are intra-state, SGST must be exempt on handlooms.

Additionally, we must urgently define ‘hand-woven’ and ‘hand-made’ in law to protect against machine-made fakes. Enforcement of the Handloom Reservation Act must be tightened to ensure authenticity.

A heritage at the crossroads

This is not just a tax debate — it’s a choice about what kind of economy and society we want. Do we want an India where every household can own a piece of its cultural heritage, or one where heritage is locked behind glass shelves in museums? Do we want rural artisans to thrive, or to be driven into menial urban labour because policies have made their craft economically unviable?

If GST 2.0 proceeds unchanged, the looms will slow, the villages will empty, and one of the oldest, proudest threads in India’s fabric will be cut.

This reform will then be remembered not as a step toward simplicity, but as the moment India chose polyester over tradition, machines over livelihoods, and short-term revenue over a living heritage.

The choice is still ours. But the clock is ticking — and the loom is slowing.

Narasimha Reddy Donthi is Visiting Senior Fellow at IMPRI.