Goods and Services Tax is, without any doubt, one of the biggest “revolutions” that the conventional taxation system of India has been faced with, involving a single tax framework for manifold goods and services. The sectors which are being considerably affected by GST include textiles, especially readymade garments. In this article, we try to delve into the GST rate on readymade garments, its implications, and also the latest updates.
Present GST Rate on Readymade Garments
GST on readymade garments follows the sale value of a garment. The ready-made garments, in the present GST regime, fall under two categories:
- Garments priced at or below ₹ 1,000: 5% GST
- Garment priced over ₹ 1,000: 12% GST
Effects of GST on Readymade Garments
The GST levied on readymade garments has its own set of benefits and losses for the industry. Let’s have a look at them below:
Positive Implication:
- Reduction of complication in taxes: Now, with GST in action, a number of taxes have been taken down from the list of taxes, thus lessening the tax liabilities on the manufacturers and retailers.
- Lower payables of tax lower the burden of the tax on the affordable range of outerwear. Only 5% of GST is levied on garments whose sales value is up to ₹1,000.
Negative Implication:
Increased tax burden: Now, with 12% of GST being charged on garments having more than ₹ 1,000 in value, it is an even more expensive tax burden on premium clothing.
This move will have its greatest impact on small manufacturers that cannot absorb such a heightened burden.
Latest Update
Since the imposition by the GST Council, the GST rate on readymade garments has undergone several changes over time, of which some are recent. Read on:
While the GST rate on readymade garments of a sale value up to ₹1,000 was reduced by the GST Council for the limited period of time from 5% to 0%, the following are the matters which may not catch the attention of many of you.
GST Council in 2022 restored the levy of tax at 5% GST on readymade garments for a sale value of up to ₹1,000.
Furthermore, you need to have a GST Registration if you plan to supply your goods and services online on an e-commerce store. You will also need to do gst return filing to generate e-way bills.
Conclusion
There have been lots of changes in the GST levied on readymade garments ever since its imposition. While the new GST structure eases the process for people paying their taxes, on the other hand, it is also increasing the tax burden on high-range clothes. Though this move is still in the process of sinking in, manufacturers and retailers should be updated regularly with new amendments made on the rates and laws of GST to keep themselves ahead of the curve and on the right side of the law.
Moreover, If you want any other guidance relating to GST Registration on readymade garments, please feel free to talk to our business advisors at 8881-069-069.
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