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The Ministry of Finance clarifies the classification of cut pieces of fabric under the Goods and Services Tax. The authority states that cutting and packing fabrics into pieces of different lengths from bundles or thans does not change the nature of the goods. These cut pieces remain classifiable under chapters 50 to 55 of the First Schedule to the Customs Tariff Act, 1975 based on their constituent materials. Such cut pieces of fabric attract a uniform GST rate of 5 percent with no refund of unutilized input tax credit. Principal Chief Commissioners, Chief Commissioners, Principal Commissioners, and Commissioners of Central Tax must issue suitable trade notices to publicize these contents.
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Circular No.13/13/2017-GST
F. No. 354/129/2017-TRU Government of India Ministry of Finance Department of Revenue Tax research Unit
North Block, New Delhi 27th October 2017
To,
The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarification on Unstitched Salwar Suits - regarding.
Doubts have been raised regarding the classification of Cut pieces of Fabrics under GST.
It has been represented that before becoming readymade articles or an apparel, the fabric is cut from bundles or thans and sold in that unstitched state. The consumers buy these sets or pieces and get it stitched to their shape and size.
Fabrics are classifiable under chapters 50 to 55 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% with no refund of the unutilized input tax credit.
Mere cutting and packing of fabrics into pieces of different lengths from bundles or thans, 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.
It is requested that suitable trade notices may be issued to publicize the contents of this circular.
Difficulty if any, in the implementation of the circular should be brought to the notice of the Board. Hindi version would follow.
Yours faithfully,
Rahil Gupta
Technical Officer (TRU)
