GST on Clothes: Applicability, Rate and HSN Code

The Indian textile industries play a key role in the development of the country’s economy with respect to employment, GDP, export promotion, etc. It’s one of the oldest industries in the country and also the second-largest industry after agriculture providing skilled and unskilled employment. GST rates on clothes or GST rates on clothing has changed a few times since the introduction of GST law due to the tax structure in the textile industry.

Taxability of GST on clothes and textiles

Sale of clothes, whether stitched or unstitched, is taxable under GST as it falls in the scope of supply. However, raw jute and raw silk are kept under nil rate of tax so no need to register under GST or pay taxes if you are a raw jure/raw silk dealer or run mills.

Buyers of raw cotton must pay GST on a reverse charge basis at 5%. Services of tailoring and renting of clothes also attracts GST. However, the composition scheme is available for supply of clothes provided the annual turnover is up to Rs.1.5 crore (Rs.75 lakhs in north-eastern states). Similarly, the limit is Rs.50 lakhs for cloth renting or stitching services.

For ‘Buy one, get one free’ offers, GST is not calculated on the items supplied without consideration. Also, the input tax credit is not available to that extent.

GST Rates and HSN code on Apparel & Clothing

Apparel and knitted clothes are covered by Chapter 61 of the HSN code. Chapter 62 covers non-knitted apparel and clothing. 

The GST rate on garments raw materials is more than the GST on finished goods, owing to which the industry isn’t able to claim the input tax credit. For resolving this issue, the Indian government has made some changes to GST on clothes from January 2022, but that is yet to be implemented. 

The GST rates on clothes was proposed to be raised from 5% to 12% from January 2022. The purpose of increasing the GST rate on clothing is to address the issues related to inverted duty structures, which impact a portion of the textile value chain. However, the industry did not seem to welcome the move and hence no notification is issued to implement the new rate.

From January 2022, the GST rates on clothes overall was going to be fixed at 12% irrespective of value. It means that the GST rates on clothes of any value whether below Rs.1,000 or above Rs.1,000 is 12%, compared to the earlier GST of 5% on garments priced up to Rs.1,000. GST on textiles including woven fabrics, synthetic yarn, pile fabrics, blankets, accessories such as tablecloths, serviettes or tapestries, and rugs was going to be increased from 5% to 12%. 

But the same is not notified, so until then the existing rate of 5% continues to apply for the lower value slab of Rs.1,000 or below. Further, a GST of 12% applies where the value of garments is more than Rs.1,000.

Tailoring services attract a GST rate of 5% under HSN code 9988. Renting of clothes attract the same rates as given above.