Textiles are India’s second largest industry after agriculture. GST on apparel divides the garments and clothing category into many categories. The garment and clothing sector is so broad that it is impossible to cover everything in one chapter. Furthermore, the GST in garments varies depending on the type of commodity. This blog will give you a detailed insight into GST on clothing.
GST Rate for Clothing in India
Various factors come into play when determining the specific GST on clothing applicable to clothing for a given customer. These factors encompass, but are not restricted to:
- The uniform pricing range,
- The type of materials utilized,
- whether the garment is entirely handcrafted or involves machinery in its production.
The rationale for this diversity lies in the vast and diversified nature of the Indian industry, making it impractical to encompass all aspects within a single chapter. The table below outlines the applicable GST on clothes.
GST Rates on Clothes
The GST on clothing in India varies according to the kind of clothing and the selling price. The following are the GST rates on apparel as of 2023:
| Clothes | GST |
| Clothes with a sale price below Rs. 1,000 | No GST |
| Clothes with a sale price of Rs. 1,000 or more | 5% |
| Ready-made GST garments | 12% |
| Synthetic and man-made fibres and fabric GST | 18% |
Exemptions from GST on Clothes
It is worth noting that only a few types of clothing do not attract the tax. For example, GST rates on garments is zero-rated in cotton textiles, khadi, and handloom clothing. This exemption is targeted towards the handloom industry and traditional Indian textiles.
Moreover, clothes sold via auctions or second-hand dealers attract no GST charges. In addition, there are also products which are given for free to consumers or for charity purposes and are not taxed under the Goods and Service Tax.
Impact of GST on Clothes
- Textiles and apparel are among those who face great challenges with the implementation of GST. Unlike its past complicated taxation structure involving many levies, the clothes GST rate has made the process easier for the sector than it used to be. This has ensured an increase in the supply chain’s accountability and transparency, thus reducing VAT fraud and simplifying the business environment.
- The high GST on clothing made from synthetic fabrics have also influenced the increased use of natural fibres such as cotton and silk that attract low textile GST. In essence, this has been positive because it has directed the textile industry towards green and sustainable textiles.
- The third impact of GST on clothes would be that all producers, distributors, as well as retailers, will have to bear more compliance costs respectively. This would result in monthly or quarterly return filings and registration on GST. The process could be very costly and tedious as well. However, this has also been a boon to the sector by making it more accountable and transparent.
Apparel Industry’s Response to the Announcement of GST Rate for Clothing
The response regarding the aforementioned tax rates issued by the GST council is similar to that experienced during its release for other product categorization. The people who are involved in the Indian garment sector shared how happy they were that the process of taxation in the current times was relatively smooth.
They also felt good that most items with amounts below Rs. 1000 remained unchanged. It is because, at most times, the total level of indirect tax was more than the five per cent rate. Nevertheless, they expressed their concerns about the amendments regarding 12% and, in some instances, 18% VAT tax on clothing.
However, it is important to stress that the GST rates for such products as clothing may vary from time to time according to the general economic condition of India and that of its fashion market. It should also be noted that products charged a zero per cent rate or exempt from GST may later be allotted a constant rate of GST.
Conclusion
One of the most affected sectors in India is the textile and apparel industry due to GST. The simplified tax framework fosters transparency and accountability; moreover, GST rates support the increase in the usage of eco-friendly and natural textiles. Despite raising the level of compliance costs for the sector, the benefits of GST rate on clothes are huge. Producers, wholesalers, and retailers need to know GST rates and rules in order to avoid breaking the law and paying fines.
FAQs
1. What is the GST rate on clothes?
The GST on clothing in India as of 2023 varies according to the kind and value of apparel. It often falls between 5% and 12%.
2. Can we claim GST on clothes?
Yes, companies are eligible to claim an Input Tax Credit (ITC) on the GST paid on apparel used for commercial purposes as long as they adhere to the GST on clothes in India requirements and maintain the required documents.
3. Is GST charged on clothes above 1000?
Yes, under the existing GST on clothing structure, clothing costs over Rs. 1000 are subject to a 12% GST levy. Nonetheless, it’s a good idea to review the most recent information on GST on clothing for the types of clothing that are subject to GST.