A client of mine commissioned an avatar which he also wanted to work on quest, there is a problem though, none of the avatar shaders have cutout rendering mode which makes the textures on certain areas to appear black, is there a solution either by editing the textures or any options in the shaders?
None of the mobile shaders for Avatars support transparency / cutout and for good reason.
You can alternatively alter the mesh on your avatars so the areas that need transparency / cutout no longer require it, which will also get rid of the black edges around these objects.
Apparently I need to cut corners quite literally, this is kind of annoying, so no one who uses Quest has an avatar with transparency?
For the most part yes.
The primary reason it’s not allowed is performance, while modern computers can easily handle cutout or transparency with often little performance hit (as long as not used in excess), a mobile system will struggle with it a lot as it causes an issue called overdraw.
Cutout isn’t as problematic, but transparency is pretty bad as with Transparency you’ll have to draw any pixel that overlaps with it twice.
Can learn more about it here.