06 Aug 2019Posted By: Mudit Handa


A Complete Guide to GST on Garments

India is known for its wide and diversified fashion. It is one of the few countries of the world that are known for their unique blend of traditionality and modernity. 

The Apparel sector of India is the oldest and a significant contributor to Indian economic development. It has a major share in GDP, besides it creates many employment opportunities. It also induces export promotion in India.

The traders as well as manufacturers of readymade garments, fabrics, and other related items having GST registration, have repeatedly made queries to the GST department regarding the applicability of GST on Garments. 

Hence, the GST council has now clarified the GST rules for Garments industry.

Here is the complete guide to GST on GST on Garments.

 

1. What is the importance of apparel industry?

As discussed above, the Apparel sector of India is the significant contributor of Indian economy. Being the second-largest sector after agriculture, the textile industry generates employment for both skilled & unskilled labor. From the trade & commerce viewpoint, apparel industry contributes over 14% of the total annual exports from India. This is likely to get a boost in the GST regime. 


2. How does GST apply to the garments?

The GST rules apply to the garments products according to 2 factors:

  1. Condition of the garments, whether finished or not.
  2. Value of the sale

3. How are garments products classified?

The garments products are classified as per their condition, whether finished or not. Accordingly, the GST rates apply. Let’s take the example of Ladies suit. Here is the classification of Ladies garments set:

  • Type-1: Salwar or churidar sets, where both the top & bottom are not stitched. This consists of 3 pieces of fabric- Kurta, Salwar & Dupatta. Here no stitching is done and 3 pieces are merely cut into fabrics from the bale. 
  • Type-2: Salwar or churidar sets, where Top is semi-stitched and bottom not stitched. Here bottom & dupatta fabrics are cut from bales, whereas Top is partially cut into shape, still requires further cutting & stitching to size.
  • Type-3: Salwar or churidar set, where Top (Kurta) is fully-stitched but bottom not stitched. Here, the bottom and dupatta fabrics are cut from the bale.
  • Type-4: Salwar or churidar set, where Neck work is done on Top (Kurta). Here, both top & bottom are not stitched. The bottom and dupatta fabrics are cut from bales.

Note: Here, 3 pieces of fabric- Kurta, Salwar & Dupatta can’t be considered as “complete ladies garments”, and shall be supplied as “fabric”. They can’t be worn without the further process of stitching.


4. What will be the GST rates on garments products?

The GST rate on different types of the garments products discussed above are given below:

  • In Type-1, salwar or churidar sets, only 3 pieces of fabric- Kurta, Salwar & Dupatta are supplied by the trader having GST registration. the applicable GST rate shall be 5% (2.5% CGST + 2.5% SGST). 

Same would apply to a men’s garment where 3 pieces of fabric- Blazer, Pants, and Shirt are supplied.

  • In all other types, the applicable GST rate shall be:-
  1. 5% (2.5% CGST + 2.5% SGST) if the value of sale is up to ₹1,000/-
  2. 12% (6% CGST + 6% SGST) if the value of sale is above ₹1,000/-  

5. What will be the GST rates on finished garments products?

As per the GST law, any piece of apparel or clothing accessories shall attract:-

  • GST @ 5% if the taxable value of the goods is up to ₹1,000/- per piece. 
  • GST @ 12% if the taxable value of the goods is more than ₹1,000/- per piece.

The same has been summarized below in the tabular form:

HSN chapters

Particulars

GST Rate

 CGST 

 SGST 

 IGST 

61,62 & 63

 Articles of apparel & clothing accessories if sale value is up to ₹1,000/- 

2.5%

2.5%

5%

61,62 & 63

Articles of apparel & clothing accessories if sale value above ₹1,000/-

6%

6%

12%

As per the GST department, many traders having GST registration have been wrongly charging 5% GST even on the garments whose taxable value is more than ₹1,000/- per piece.

This is the complete guide for all the traders and manufacturers of garments.

In case you require any sort of help with respect to the GST registration, please feel free to contact us at 8881-069-069.

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