Clarification regarding GST rates & classification (goods)

Circular No.ES/331 /2018-19                                                             January 05, 2019

To: Members of the Council

Sub.: Clarification regarding GST rates & classification (goods)

Dear Member,

We would like to inform you that CBIC has issued Circular No. 80/54/2018- GST dated 31st December, 2018 clarifying the issue of GST rate applicable on Embroidered fabric sold in three pieces cloth for lady suits (fabric for suit, salwar and dupatta). In this connection, CBIC had received representations seeking clarification on this issue.

Relevant extract of the clarification is given here- below:-

Applicability of GST on supply of embroidered fabric sold in three pieces for lady suits:

It has been informed that before becoming readymade articles or an apparel, the fabric is cut from bundles or thans and sold in that unstitched state with certain embellishment like gota etc. The consumers buy these sets or pieces and get it tailored which entails cutting of fabric in shape and stitching thereof. Doubts have arisen as regards applicable rates on such three fabric pieces in sets/packs.

Fabrics are classifiable under chapters 50 to 55 and 60 of the First Schedule to the Customs Tariff Act, 1975 on the basis of their constituent materials and attract a uniform GST rate of 5%. Garments and made up articles of textiles under chapters 61, 62 and 63 attract GST at the rate of 5% when value is upto Rs 1000 per piece and 12% when the value exceeds Rs. 1000 per piece.

Earlier, vide Circular no. 13/13/2017-CGST dated 27th October 2017, it has been clarified by CBIC that mere packing of fabrics into pieces of different lengths will not change the nature of these goods and such pieces of fabrics would continue to be classifiable under the respective heading as the fabric and attract the 5% GST rate. This clarification would equally apply to three pieces of fabrics sold in a pack as ladies salwar suit. Any embroidery on a fabric piece or certain embellishment thereon does not change the basic nature of their being a fabric. The chapter 63 covers garment, including the unstitched garments which may or may not be sufficiently completed to be identifiable as garments or parts of garments. However, heading 6307 would not cover a fabric pieces or a set of pre-packed fabric pieces, even if embroidered or embellished. Such set of fabric pieces would attract GST at the rate of 5%.

Members may kindly make a note of the above clarification.

For more clarifications on other issues, members may refer to Circular No. 80/54/2018- GST dated 31st December, 2018.

Thanking you,

Yours faithfully,