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GST Rate on Clothes: Everything You Need to Know
Goods and Services Tax (GST) applies to most goods and services in India, including clothing. However, the GST rate on clothes varies based on factors like price, type of fabric, and services like tailoring or renting. If you’re wondering "What is the GST rate for ready-made garments?" or "How does GST apply to clothing businesses?", this guide has all the answers.
GST Rate on Clothes in India
- Clothes priced up to ₹1,000 per piece – 5% GST
- Clothes priced above ₹1,000 per piece – 12% GST
This applies to both ready-made garments and unstitched fabrics.
GST on Textile Materials
- Raw Jute & Raw Silk – 0% GST (exempt from GST)
- Raw Cotton – 5% GST (reverse charge mechanism applies to buyers)
- Synthetic Yarns, Pile Fabrics, Woven Fabrics, and Accessories – 12% GST
GST Applicability on Clothes and Related Services
1. GST on Ready-Made Garments
- Below ₹1,000 – 5% GST
- Above ₹1,000 – 12% GST
2. GST on Tailoring Services
If you get your clothes stitched by a tailor, the service is taxed at 5% GST (HSN Code 9988).
3. GST on Renting of Clothes
Clothing rental services attract 5% GST for garments below ₹1,000 and 12% GST for garments above ₹1,000.
4. GST on Fabric and Textile Raw Materials
- While most textile materials attract 12% GST, raw silk and raw jute are exempt from GST.
- Buyers of raw cotton must pay GST at 5% under the reverse charge mechanism.
Special GST Rules for Clothing Businesses
1. Composition Scheme for Small Businesses
- If your annual turnover is up to ₹1.5 crore (₹75 lakh in North-Eastern states), you can opt for the composition scheme, which allows businesses to pay a lower tax rate and avoid complex GST filings.
- For tailoring and renting services, the turnover limit for the composition scheme is ₹50 lakh.
2. GST on "Buy One, Get One Free" Offers
- No GST is levied on the free item in a "Buy One, Get One Free" offer.
- Businesses cannot claim Input Tax Credit (ITC) for the free item under this scheme.
3. GST Rate on Different Types of Clothing (HSN Codes)
- Chapter 61 of HSN Code – Covers knitted or crocheted apparel.
- Chapter 62 of HSN Code – Covers non-knitted apparel and clothing accessories.
Impact of GST on the Clothing Industry
1. Inverted Duty Structure Challenge
The GST rate on raw materials (12%) is higher than on finished garments (5%), causing an inverted duty structure where businesses pay more tax on inputs than they can recover on sales.
2. Proposed Changes in GST Rates on Clothes
In January 2022, the government proposed increasing the GST on all garments to 12%, aiming to fix the inverted duty issue. However, due to industry pushback, this change was not implemented. Until further notification, the existing 5% GST on clothes priced below ₹1,000 remains applicable.
3. Simplified Taxation for Businesses
Before GST, clothing was taxed under VAT, excise duty, and service tax. Now, a single GST rate applies, reducing paperwork and making tax compliance easier for businesses.
FAQs on GST Rate for Clothes
1. What is the GST rate for ready-made garments?
- 5% GST for garments priced up to ₹1,000
- 12% GST for garments above ₹1,000
2. Is GST applicable to unstitched fabrics?
Yes, unstitched fabrics attract 5% GST for lower-priced items and 12% GST for higher-priced materials.
3. What is the GST rate on tailoring services?
Tailoring services are taxed at 5% GST under HSN Code 9988.
4. Do I need to pay GST if I run a clothing store?
If your annual turnover exceeds ₹40 lakh (₹20 lakh for North-Eastern states), you must register for GST and charge it on sales.
5. Can businesses claim an Input Tax Credit (ITC) on clothing purchases?
Yes, GST-registered businesses can claim ITC on clothing purchases used for business purposes.
Final Thoughts
The GST rate on clothes depends on price, type of fabric, and related services like tailoring and renting. While lower-priced garments benefit from a 5% GST rate, high-end fashion attracts a 12% tax. Although the government proposed a uniform 12% GST rate on all garments, it has not been implemented yet.
Understanding these GST implications helps both consumers and businesses make informed financial decisions. For more updates on GST, income tax, and financial insights, stay tuned!