Garments come under one of the most significant sectors of the Indian economy. With the implementation of GST in July 2017, the apparel industry went through a significant change. Prior to GST, multiple indirect taxes were applicable, such as excise duty, VAT, and service tax, among others. However, now, GST has replaced all these taxes, and the apparel industry needs to comply with the new tax regime.
The government has levied a 5% tax on readymade garments under GST. However, the GST is not applicable to clothes that cost less than Rs. 1,000. For clothes that cost more than this amount, the GST rate is 12%. However, there are specific exceptions to this rule as well. For instance, the GST rate for khadi clothes is 0%, while school uniforms and clothes for disabled people are also exempted from GST.
It is noteworthy that the 5% and 12% GST rates are applicable on the transaction value of the garments. The transaction value is the price paid by the buyer for the goods supplied.
Harmonized System of Nomenclature (HSN) is a code system that classifies goods into specific categories for taxation purposes. It is used to determine the tax liability of goods under the GST system. For garments, HSN code 6113 is used.
HSN code 6113 is applicable for all types of garments, including woolen, cotton, and silk clothes, among others. It is also used for the classification of several accessories, such as gloves and mittens, among others.
The implementation of GST has brought a uniform tax system across the country, which has been beneficial for the garment industry. Earlier, the tax structure was complex and varied from state to state. However, now, the industry needs to pay a single tax on the transaction value of the goods.
Moreover, GST has also helped in reducing the overall tax burden on the industry. The government has also provided several exemptions and incentives to promote the growth of the garment industry in India. For instance, the government has exempted khadi clothes from GST to promote the handloom sector in the country.
Overall, GST has brought a significant change in the garment industry in India. It has provided a single tax system that has reduced the tax burden on the industry. The HSN code 6113 is used for the classification of garments under GST. However, the GST rate for garments depends on the transaction value of the goods. It is essential for businesses in the garment industry to comply with the new tax regime to avoid any legal trouble.
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