GST on Textile Sector in India- Question and Answer

gst on textile

GST on Textile sector: Goods and Service Tax has covered almost all sectors. Textile is one of them. Following mentioned are the impacts of GST on textile-Input Tax Credit- ITC is not allowed if inputs are procured from Composition scheme tax payer or the unorganized sector.

Reduction in manufacturing costs because it has subsumed various fringe taxes like Octroi, Entry tax, Luxury tax, Excise, VAT, etc.

Available input credit on capital goods which was not available earlier in case of Excise Duty.

Increase in export of textile products as input tax credit (ITC) will be provided as refund instead of earlier duty drawback scheme giving a significant boost to export.

Read Also: GST Input Tax Credit (ITC) Set-off Rules – Simplified with examples

QUESTION- Which  textile products are covered under GST?

ANSWER- The textile products covered under chapter 63 of the HSN code which are as follows:

  • Blankets and travelling rugs.
  • Bed linen, knitted or crocheted, toilet linen and kitchen linen, of terry towelling or similar terry fabrics.
  • Curtains (including drapes) and interior blinds; curtain or bed valances.
  • Other furnishing articles such as bedspreads, counterpanes, napkins, pillowcase and pillow slip, table cloth and table cover, Towels, other than a terry towel, mosquito nets, cushion covers
  • Sacks and bags, of a kind used for the packing of goods.
  • Tarpaulins, awnings and sun blind; tents; sails for boats, sailboards or land craft; camping goods.
  • Other made up articles, including dress patterns; such as floor-cloths, dishcloths, dusters and similar cleaning cloths, life-jackets and lifebelts, sets consisting of woven fabric and yarn, whether or not with accessories, for making up into rugs, tapestries, embroidered table cloths or serviettes, or similar textile articles, put up in packings for retail sale.
  • Worn clothing and other worn articles.
  • Used or new rags, scrap twine, cordage, rope and cables and worn out articles of twine, cordage, rope or cables, of textile materials.

GST Input Tax Credit Refund- Cases, Process, Documents

QUESTION- What is the rate of GST on textile or garments or clothes?

ANSWER- Following table shows stage wise tax rates in Textile sector:

Material/ FibreFibre/ RawYarnFabric

GST rate on readymade garments or Apparels

  • 5% – where sale value is Less than Rs 1000.
  • 12%- Where sale value is more than Rs 1000.

GST on Job Work

Material/ FibreFibre/ RawYarnFabric
Jute & Silk Articles5%5%18%

GST rate on Job work in relation to Textiles and textile products is 5%.

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QUESTION- Is GST included in MRP of Clothes?

ANSWER- MRP (Maximum Retail Price) is the maximum price that can be charged from Buyers. MRP is inclusive of all taxes including GST. GST cannot be charged over and above MRP.

QUESTION- Is GST applicable on readymade garments? If yes, then what is the rate?

ANSWER- Yes. GST is applicable on readymade garments

  • 12% – if the sale value exceed Rs. 1000 per piece
  • 5%  –  if sale value does not exceed Rs. 1000 piece.

QUESTION- Cotton under chapter heading 5201 and 5203 has been kept in 5% rate slab. Does this mean that cotton farmer require register under GST?

ANSWER- No. As per Section 23(1)(b) of the CGST Act, 2017 an agriculturist, to the extent of supply of produce out of cultivation of land is not liable to registration.

2022 GST Calendar

QUESTION-  In respect of goods classified as Apparels/Garments, the rate of tax for goods of sale value not exceeding Rs.1000/- is 5 percent and for those exceeding Rs.1000/- is 12%. Is this value transaction value or MRP?

ANSWER- As per the GST rate schedule, all goods of sale value not exceeding value of Rs.1000/- per piece would be taxed at 5% and the goods of sale value exceeding Rs.1000/- per piece would be taxed at 12%. Therefore, it is the sale value i.e. the transaction value on which the tax has to be paid and not the MRP (Maximum Retail Price).

QUESTION- Does the buyer of raw cotton (who is a registered person) from the farmer need to pay GST on Reverse charge basis?

ANSWER- Yes. As farmer is not liable to registration and the rate of cotton is 5 percent payable under Reverse Charge Mechanism, the buyers of raw cotton (who are registered person) from farmers are required to pay GST on reverse charge basis.

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QUESTION- Man-made textile yarns have been kept at 18% rate while fabrics have been kept at 5 percent rate. If a person buy yarn worth Rs. 100 by paying tax at 18% i.e. Rs. 18/- and he sell grey fabrics at Rs. 150/- considering 50 percent value addition by paying tax at 5% i.e. Rs. 7.50, what will be the treatment of remaining input credit of Rs. 11.50. Whether the person would get refund of remaining GST credit?

ANSWER- The person can claim full Input Tax Credit (ITC) of Rs. 18/- paid on inputs i.e. yarn but whatever credit remains unutilized will remain in your electronic credit ledger and no refund of the same will be allowed.

Read Also: E-Invoice Under GST – Limit, procedure, Starting Date, benefits

QUESTION- There is a confusion on the tax applicable for Embroidered Sarees and Fabric. Typically, principal manufacturers supply fabric/Sarees to Job workers and get various embroidery designs done on the fabric/sarees. We understand that the textile job worker would charge an output supply GST of 5% on the composite job work supply. This embroidery fabric/saree are then sold by the principal manufacturers to wholesale and retail sellers. What would be the output GST applicable on such embroidered fabric/sarees when the same is sold by the principal manufacturer?

ANSWER- The GST rate of 5% would be chargeable on the jobwork process relating to the textile yarns (other than Man Made Fibre/Filament) and fabrics. Sarees are treated as fabrics and a saree remains fabrics only as no new item emerges having distinct name, character and use. Stitching of two or more different kinds of fabrics also does not take away its classification. Therefore, the sarees whether embroidered or not would be taxed at the same rate at which the fabric is taxed.

QUESTION- Whether Shawl is a fabric or apparel or made-up. What is the rate on Shawls?

ANSWER- Shawls fall in the category of articles of apparel and clothing accessories and are classified under heading 61.17, if stitched and under heading 62.14, if not stitched. If the sale value of shawl does not exceed Rs.1000/- per piece, the rate of tax is 5% and if the sale value exceeds Rs.1000/- per piece the rate is 12%.

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The author of the above article is CA Rahul Gaur.

Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. 
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