GST on Clothes

GST on Clothes is an important topic for anyone involved in buying, selling, or supplying garments in India. Clothing is a daily need, and even small tax changes can affect prices and business decisions. Under the Goods and Services Tax system, clothes are taxed based on their value and type, with clear rules for both goods and services.

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Applicability of GST on Clothes

GST applies to the sale of clothes, whether they are stitched or unstitched. Garments are treated as taxable goods under GST because they fall within the scope of supply. However, some raw materials such as raw jute and raw silk are exempt. Dealers or mills handling only these items do not need GST registration.

In certain cases, GST is paid under a reverse charge system. Buyers of raw cotton must pay GST at 5% under this mechanism. Services linked to clothing, such as tailoring and renting garments, are also taxable.

GST Rates on Clothes

At present, GST on Clothes depends on the value of the garment. Clothes priced at ₹1,000 or below attract 5% GST, while garments priced above ₹1,000 are taxed at 12%. A proposal to apply a uniform 12% GST rate on all clothing from January 2022 was discussed. However, this change was not notified, so the existing rates continue.

Tailoring services attract GST at 5%. Renting of clothes follows the same GST rate structure as applicable to garments.

HSN Codes and Industry Impact

Knitted clothes are classified under HSN Chapter 61, while non-knitted clothes fall under Chapter 62. One problem faced by the textile industry is that raw materials are sometimes taxed at a higher GST rate than finished clothes. Because of this, businesses cannot fully use the tax credit they pay on raw materials, which affects their cash flow.

Conclusion

GST on Clothes is based on the value of the garment and aims to keep prices reasonable while collecting tax. Knowing these rules helps businesses follow the law and helps customers understand how clothing prices are decided.