Key Takeaways
- Under GST 2.0 (effective September 22, 2025), ready-made garments up to Rs 2,500 per piece attract 5% GST; above Rs 2,500, the rate is 18% GST.
- All fabric (woven, knitted, non-woven) is uniformly taxed at 5% GST, regardless of value.
- Natural and man-made fibre yarn both attract 5% GST; man-made fibre raw material stays at 18%.
- HSN Chapters 50 to 63 cover the entire textile chain from raw silk to made-up articles like bedsheets and curtains.
- Full Input Tax Credit (ITC) is available at both the 5% and 18% rate, flowing through the fibre, yarn, fabric, garment chain.
- Textile businesses with turnover above Rs 5 crore must generate e-invoices from April 2026.
What is the GST rate on textiles and garments in India in 2026? Under GST 2.0, garments priced up to Rs 2,500 per piece are taxed at 5% GST. Garments above Rs 2,500 per piece attract 18% GST. All fabric is at a flat 5%, and both natural and man-made fibre yarn are at 5%. Man-made fibre raw material remains at 18%.
India's textile and garment sector is one of the largest contributors to GST revenue, and the rate structure has seen multiple revisions since 2017. The introduction of GST 2.0 on September 22, 2025 brought the most significant simplification yet: the old multi-tier system collapsed into a cleaner two-rate split at the Rs 2,500 per piece threshold for garments, with fabric and yarn largely settling at 5%.
Whether you are a fabric weaver in Surat, a garment manufacturer in Tiruppur, or a retail trader in Hyderabad, this guide covers the exact rates, HSN codes, ITC mechanics, and compliance obligations you need to get right.
Looking for expert help with GST on textiles and garments India 2026 rates HSN codes ITC compliance? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
GST Rate Structure for Textiles Under GST 2.0
The rate structure effective September 22, 2025 simplified textile taxation into predictable slabs. Here is the complete breakdown.
Garments and Ready-Made Clothes
Tax Rate Chart
GST on Garments (Ready-Made Clothes) 2026
Rate depends on sale value per piece, not per metre or per kg
Garments with sale value up to Rs 2,500 per piece
2.5% CGST + 2.5% SGST : Chapters 61, 62, 63 items
Garments with sale value above Rs 2,500 per piece
9% CGST + 9% SGST : applies from the first rupee, not just the excess
Source: GST 2.0 rate notifications effective September 22, 2025; CBIC Notification
Critical point: the 18% rate on garments above Rs 2,500 applies to the entire value of the garment, not just the amount exceeding Rs 2,500. If a shirt is sold for Rs 2,600, the entire Rs 2,600 is taxed at 18%.
Fabric
| Fabric Type | GST Rate | HSN Chapters |
|---|---|---|
| Woven fabric (cotton, silk, wool, synthetic blends) | 5% | 50-55, 58 |
| Knitted or crocheted fabric | 5% | 60 |
| Non-woven fabric (wadding, felt) | 5% | 56 |
| Special woven fabric, tufted textile | 5% | 58 |
| Impregnated, coated, laminated textile fabric | 5% | 59 |
Under the previous structure, certain man-made fibre (MMF) fabric attracted 12%. GST 2.0 brought all fabric to a uniform 5%, resolving the inverted duty problem that plagued MMF weavers for years.
Yarn and Fibre
Tax Rate Chart
GST on Yarn and Fibre 2026
Natural and man-made fibre yarn unified at 5% under GST 2.0
Natural fibre yarn (cotton, silk, wool, jute)
2.5% CGST + 2.5% SGST
Man-made fibre yarn (polyester, nylon, acrylic)
Reduced from earlier 12% or 18% on some MMF yarn categories
Man-made fibre raw material (polymer chips, PTA, MEG)
9% CGST + 9% SGST : upstream petrochemical inputs
Source: GST 2.0 rate notifications; CBIC rate schedule for Chapters 54-55
The reduction of MMF yarn from 18% (on some categories) to a uniform 5% was the single biggest relief for the textile value chain. Earlier, MMF yarn taxed at 18% fed into fabric taxed at 5%, creating a persistent inverted duty structure where manufacturers accumulated ITC they could not utilise. That bottleneck is now resolved.
How the Rs 2,500 Threshold Works
The threshold applies to transaction value per piece, not MRP, not per metre, and not per kg. Understanding the nuances prevents classification disputes.
Value Determination Rules
| Scenario | Taxable Value | Applicable Rate |
|---|---|---|
| Shirt sold at Rs 2,400 | Rs 2,400 | 5% |
| Shirt sold at Rs 2,600 | Rs 2,600 | 18% |
| Shirt with MRP Rs 3,000 sold at Rs 2,400 after discount | Rs 2,400 | 5% (discount reduces taxable value) |
| Suit set (kurta + trouser) sold as a set for Rs 4,000 | Rs 4,000 (aggregate set price) | 18% |
| Same kurta and trouser sold individually at Rs 2,000 each | Rs 2,000 per piece | 5% on each piece |
Practical implications for retailers:
-
Discounts reduce the taxable value. If your billing system applies a trade discount before invoicing, and the post-discount value falls at or below Rs 2,500, the 5% rate applies. The discount must appear on the invoice, not as a post-sale credit note.
-
Sets and combos take the aggregate price. A three-piece suit set sold for Rs 5,000 as a single SKU attracts 18% on the full Rs 5,000, even if each individual piece would cost less than Rs 2,500 if sold separately.
-
Mixed invoices are fine. If one invoice contains five garments, three priced below Rs 2,500 and two above, you apply 5% on the first three and 18% on the other two. Line-item-level rate assignment is standard practice.
HSN Codes for Textiles: Chapters 50 to 63
The Harmonised System of Nomenclature (HSN) codes for textiles span 14 chapters. Every textile invoice must carry the correct HSN code; the digit requirement depends on your turnover.
| Turnover | HSN Digits Required on Invoice |
|---|---|
| Up to Rs 5 crore | 4-digit HSN code |
| Above Rs 5 crore | 6-digit HSN code |
Complete Chapter Reference
| Chapter | Description | HSN Range | Common Products |
|---|---|---|---|
| 50 | Silk | 5001-5007 | Raw silk, silk yarn, silk fabric |
| 51 | Wool and animal hair | 5101-5113 | Wool yarn, woven wool fabric, shawls |
| 52 | Cotton | 5201-5212 | Raw cotton, cotton yarn, cotton fabric |
| 53 | Vegetable textile fibres | 5301-5311 | Jute, coir, hemp, flax |
| 54 | Man-made filaments | 5401-5408 | Polyester filament yarn, nylon yarn |
| 55 | Man-made staple fibres | 5501-5516 | Acrylic staple fibre, viscose fabric |
| 56 | Wadding, felt, nonwovens | 5601-5609 | Surgical cotton, felt fabric, rope |
| 57 | Carpets and floor coverings | 5701-5705 | Handknotted carpets, tufted carpets |
| 58 | Special woven fabrics | 5801-5811 | Velvet, chenille, lace, tapestry |
| 59 | Coated textile fabrics | 5901-5911 | Rubberised fabric, tarpaulin, textile hoses |
| 60 | Knitted or crocheted fabrics | 6001-6006 | Knit fabric rolls (not finished garments) |
| 61 | Apparel, knitted | 6101-6117 | T-shirts, sweaters, underwear, socks |
| 62 | Apparel, not knitted | 6201-6217 | Suits, shirts, dresses, trousers, sarees |
| 63 | Made-up textile articles | 6301-6310 | Bedsheets, curtains, towels, bags, tents |
Classification tip: Chapters 61 and 62 cover finished garments (the Rs 2,500 threshold applies here). Chapter 63 covers made-up articles like bedsheets and curtains. Chapters 50 to 60 cover raw materials, yarn, and fabric (all at 5%).
Looking for expert help with textile HSN codes GST rates India garments fabric yarn 2026? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
Input Tax Credit (ITC) for Textile Businesses
Unlike restaurants (which operate on 5% without ITC), textile businesses at both 5% and 18% rates are entitled to full ITC. This is a significant advantage that keeps the credit chain intact across the production stages.
The ITC Chain: Fibre to Garment
The textile value chain has distinct stages, and ITC flows through each:
Step-by-Step Guide
ITC Flow in the Textile Value Chain
Credit flows from raw material to finished garment at each production stage
Raw Material (Fibre)
Cotton, polyester chips, silk cocoons. Natural fibre at 5%, MMF raw material at 18%. ITC on inputs is claimable by the spinner.
FibreSpinning (Yarn)
Fibre is spun into yarn. Yarn taxed at 5%. The spinner claims ITC on fibre purchases, power, and machinery.
YarnWeaving or Knitting (Fabric)
Yarn is woven or knitted into fabric. Fabric taxed at 5%. The weaver claims ITC on yarn, sizing chemicals, and loom maintenance.
FabricManufacturing (Garment)
Fabric is cut, stitched, and finished into garments. Garments taxed at 5% or 18% based on the Rs 2,500 threshold. The manufacturer claims ITC on fabric, trims, thread, and job work charges.
GarmentRetail (Sale to Consumer)
The retailer collects GST from the end consumer and claims ITC on the garments purchased from the manufacturer or wholesaler.
RetailSource: CGST Act 2017, Sections 16-18; ITC provisions applicable to textile supply chain
ITC Rules Specific to Textiles
| Rule | What It Means |
|---|---|
| Full ITC at both rates | Whether your output is at 5% or 18%, you claim ITC on all eligible inputs. No restriction like the restaurant sector. |
| Section 16(4) time limit | ITC must be claimed by the earlier of: the due date of September return of the following financial year, or the date of filing the annual return. Miss this deadline, and the credit lapses permanently. |
| Job work ITC (Section 143) | Goods sent for job work (dyeing, printing, embroidery, stitching) remain eligible for ITC. The principal must maintain records and receive finished goods within 1 year (or 3 years for capital goods). |
| Inverted duty refund | If your input rate (18% on MMF raw material) exceeds your output rate (5% on yarn), you accumulate excess ITC. Claim refund under Section 54(3) read with Rule 89(5) of the CGST Rules. |
| ITC reversal on non-payment | If you do not pay your supplier within 180 days of the invoice date, the ITC already claimed must be reversed under Section 16(2)(d), along with interest. |
Inverted Duty Structure: When to Claim Refund
The most common inverted duty scenario in textiles occurs at the yarn-manufacturing stage:
- Input: MMF raw material at 18% GST
- Output: MMF yarn at 5% GST
The manufacturer accumulates excess ITC that cannot be set off against output liability. Section 54(3) of the CGST Act permits a refund of this accumulated ITC. File the refund application using Form GST RFD-01 on the GST portal. The refund is calculated using the formula in Rule 89(5):
Maximum Refund = (Turnover of inverted-rated supply / Adjusted Total Turnover) x Net ITC, minus Tax payable on inverted-rated supply
File refund applications promptly; do not let multiple quarters of excess ITC accumulate without action.
Composition Scheme for Textile Traders
Small textile traders who do not need ITC and operate within a single state can opt for the Composition Scheme under Section 10 of the CGST Act.
Comparison
Regular GST vs Composition Scheme for Textile Businesses
| Parameter | Regular GST Registration | Composition Scheme |
|---|---|---|
| Turnover limit | No upper limit | Up to Rs 1.5 crore (manufacturers and traders) |
| Tax rate | 5% or 18% based on garment value | 1% flat on turnover (0.5% CGST + 0.5% SGST) |
| Input Tax Credit | Full ITC available on all eligible inputs | No ITC available; GST on purchases is a cost |
| Inter-state sales | Allowed (IGST applies) | Not allowed; intra-state only |
| E-commerce sales | Allowed | Not allowed (Section 52 restriction) |
| Filing frequency | Monthly GSTR-1 and GSTR-3B | Quarterly CMP-08, annual GSTR-4 |
| Invoice type | Tax invoice (buyer can claim ITC) | Bill of Supply (buyer cannot claim ITC) |
| Best suited for | Manufacturers, exporters, B2B sellers, high-input-cost businesses | Small retailers selling directly to consumers with low input costs |
Takeaway: Choose composition only if your customers do not need ITC, you sell within one state, and your input costs are low relative to turnover. Most textile manufacturers benefit more from regular registration because ITC on fabric, trims, and job work exceeds the composition savings.
Source: CGST Act 2017, Section 10; CGST Rule 7; Notification 14/2019-CT
Key Exemptions and Special Rates
Not everything in textiles is taxed at 5% or 18%. A few categories carry special treatment.
| Category | GST Treatment | Basis |
|---|---|---|
| Khadi fabric sold through khadi institutions | Exempt (0%) | Notification under Schedule of Exempt Goods |
| Handloom products | 5% GST | Concessional rate, not fully exempt |
| Export of textiles | Zero-rated (0%) | Section 16 of IGST Act; claim ITC refund or use LUT bond |
| Carpets (handknotted) | 5% | HSN 5701; handknotted carpets retain lower rate |
| Technical textiles (geotextiles, medical textiles) | 5% or 18% | Depends on specific HSN classification |
Export compliance: If you export garments or fabric, you have two options:
- Supply under Letter of Undertaking (LUT): No GST is charged on the export invoice. File LUT in Form GST RFD-11 before the start of the financial year.
- Supply with IGST payment: Charge IGST on the export invoice and claim refund after the goods are exported.
Most exporters prefer the LUT route to preserve working capital.
E-Invoice and Compliance Requirements
E-Invoice Mandate
From April 2026, textile businesses with aggregate turnover exceeding Rs 5 crore in any financial year from 2017-18 onwards must generate e-invoices through the Invoice Registration Portal (IRP).
| Requirement | Detail |
|---|---|
| Turnover threshold | Rs 5 crore aggregate (any year from FY 2017-18) |
| Effective date | April 1, 2026 |
| Applicability | All B2B invoices, debit notes, credit notes |
| Non-compliance penalty | Invoice treated as invalid; buyer cannot claim ITC |
HSN Code Compliance on Invoices
| Turnover | HSN Requirement |
|---|---|
| Up to Rs 5 crore | 4-digit HSN mandatory |
| Above Rs 5 crore | 6-digit HSN mandatory |
Incorrect or missing HSN codes on invoices can trigger notices during assessment. For textile businesses dealing in multiple product types (yarn, fabric, garments, made-up articles), maintaining an accurate HSN master in your billing software is essential.
Return Filing Obligations
Regular textile businesses file:
- GSTR-1 (outward supply details): by the 11th of the following month
- GSTR-3B (summary return with tax payment): by the 20th of the following month (staggered dates for certain states)
- GSTR-9 (annual return): by December 31 of the following financial year
- GSTR-9C (reconciliation statement): required if turnover exceeds Rs 5 crore
Rate History: How Textile GST Rates Evolved
Understanding the history helps context for current clients who may still have old-rate invoices in their books.
Deadline Timeline
GST Rate Timeline for Textiles
Key milestones from GST launch to the current structure
GST launch: garments up to Rs 1,000 at 5%, above Rs 1,000 at 12%
Fabric at 5%, MMF yarn at 12% or 18% depending on type
GST Council proposed uniform 12% on all textiles
Proposal deferred after strong industry pushback from Surat, Tiruppur, and Kolkata
GST 2.0: garments split at Rs 2,500 threshold (5% / 18%)
All fabric at 5%, all yarn at 5%, MMF raw material at 18%
E-invoice mandate extended to Rs 5 crore turnover businesses
Textile businesses above threshold must generate e-invoices for all B2B transactions
Source: GST Council meeting records; CBIC notifications; Finance Act 2025
Practical Scenarios for Textile Businesses
Scenario 1: Retail Garment Shop in Hyderabad
A garment retailer sells a mix of budget and premium clothing. In a single sale:
- 3 cotton kurtas at Rs 1,200 each: 5% GST on each (total tax = Rs 180)
- 1 designer saree at Rs 4,500: 18% GST (tax = Rs 810)
- 1 pair of jeans at Rs 2,500: 5% GST (tax = Rs 125), since Rs 2,500 is "up to" the threshold
Total GST collected: Rs 1,115. The retailer claims ITC on all purchases from wholesalers.
Scenario 2: MMF Yarn Manufacturer
A polyester yarn manufacturer in Surat buys polymer chips (PTA, MEG) at 18% GST and sells yarn at 5%.
- Monthly input purchases: Rs 50 lakh (GST paid: Rs 9 lakh at 18%)
- Monthly yarn sales: Rs 65 lakh (GST collected: Rs 3.25 lakh at 5%)
- Excess ITC accumulated per month: Rs 5.75 lakh
This manufacturer should file refund claims under Section 54(3) every quarter to recover the accumulated ITC and maintain working capital.
Scenario 3: Garment Exporter Using LUT
An exporter ships Rs 2 crore worth of garments per month under LUT.
- GST charged on exports: Rs 0 (zero-rated under LUT)
- ITC on domestic purchases (fabric, trims, job work): Rs 8 lakh per month
- Refund claim: Rs 8 lakh per month under Section 54(3) for zero-rated supplies
The exporter must file LUT (Form GST RFD-11) before the start of each financial year and maintain shipping bill documentation for refund verification.
Looking for expert help with GST textile garment compliance filing ITC refund Hyderabad India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
How Tax Garden Helps Textile Businesses
Tax Garden works with textile manufacturers, traders, and exporters across Hyderabad to handle the full compliance cycle:
- HSN mapping and rate verification across your product catalogue
- Monthly GSTR-1 and GSTR-3B filing with ITC reconciliation against GSTR-2B
- Inverted duty refund applications for yarn and fabric manufacturers
- E-invoice setup and ongoing generation for businesses crossing the Rs 5 crore threshold
- Export compliance including LUT filing, shipping bill reconciliation, and IGST refund claims
- Composition scheme advisory for small retailers evaluating the trade-off between 1% composition and regular ITC-eligible filing
Frequently Asked Questions
What is the GST rate on garments in India in 2026?
Garments priced up to Rs 2,500 per piece attract 5% GST (2.5% CGST + 2.5% SGST). Garments above Rs 2,500 per piece attract 18% GST (9% CGST + 9% SGST). The rate applies to the entire sale value, not just the amount exceeding the threshold.
Is GST on fabric 5% or 12% in 2026?
All fabric, whether woven, knitted, or non-woven, is taxed at a uniform 5% GST under GST 2.0. The earlier 12% rate on certain man-made fibre fabrics has been removed.
Can textile businesses claim Input Tax Credit (ITC)?
Yes. Unlike restaurants that operate at 5% without ITC, textile businesses at both 5% and 18% GST rates are entitled to full ITC on all eligible inputs including fabric, yarn, trims, job work charges, and capital goods.
What HSN code should I use for T-shirts?
T-shirts fall under Chapter 61 (knitted apparel). The 4-digit HSN code is 6109 for T-shirts, singlets, and tank tops. Businesses with turnover above Rs 5 crore must use the 6-digit code (e.g., 610910 for cotton T-shirts).
How does the Rs 2,500 threshold work for discounted garments?
The threshold applies to the actual transaction value (sale price), not the MRP. If a garment with MRP Rs 3,000 is sold at Rs 2,400 after discount, the taxable value is Rs 2,400, and 5% GST applies. The discount must appear on the tax invoice.
Is khadi exempt from GST?
Khadi fabric sold through khadi institutions and stores is exempt from GST (0%). Handloom products are not fully exempt but attract a concessional rate of 5% GST.
Can I use the Composition Scheme for my textile business?
Yes, if your aggregate turnover is up to Rs 1.5 crore, you sell within a single state, and you do not sell through e-commerce platforms. The composition rate is 1% on turnover. However, you lose ITC eligibility, and your B2B buyers cannot claim ITC on purchases from you.
What is the GST refund process for inverted duty in textiles?
If your input GST rate (e.g., 18% on MMF raw material) exceeds your output rate (5% on yarn), file a refund application using Form GST RFD-01 on the GST portal under Section 54(3). The refund is calculated per the formula in Rule 89(5) of the CGST Rules.
When is e-invoicing mandatory for textile businesses?
From April 2026, textile businesses with aggregate turnover exceeding Rs 5 crore in any financial year from 2017-18 onwards must generate e-invoices for all B2B transactions through the Invoice Registration Portal (IRP).
Is export of textiles taxable under GST?
Exports are zero-rated under Section 16 of the IGST Act. You can either export under a Letter of Undertaking (LUT) without charging GST and claim ITC refund, or charge IGST on the export invoice and claim IGST refund after export.
Sources and verification: Rate structure sourced from GST 2.0 notifications effective September 22, 2025, issued by CBIC. HSN classifications follow the Customs Tariff Act schedule aligned with WCO Harmonised System. ITC provisions referenced from Sections 16 to 18 of the CGST Act, 2017. Composition scheme details from Section 10, CGST Act and Notification 14/2019-CT. E-invoice thresholds from CBIC Notification applicable from April 2026. Export zero-rating provisions from Section 16, IGST Act, 2017. All rates and thresholds verified as of June 2026.
Work with the Trusted Tax & Compliance Services in Kondapur, Hyderabad - Tax Garden for expert GST filing, ITR, TDS, ROC, and startup compliance support.
Frequently Asked Questions: Tax Services in Kondapur & Hyderabad
What makes Tax Garden a preferred GST consultant in Kondapur?
Tax Garden is ISO 9001:2015 certified and backs every engagement with Kavach, our ₹50,000 error-protection cover. Our flat-fee, no-surprise pricing and dedicated account manager make us a compliance partner for startups and SMEs in Kondapur's HITEC City corridor.
Why is Tax Garden a trusted tax compliance partner in Hyderabad?
Trust comes from three pillars at Tax Garden. First, transparency: you know the exact fee before you sign up, and it never changes mid-year. Second, certified expertise: our compliance team is qualified, and the firm holds ISO 9001:2015 certification. Third, accountability: Kavach, our unique error-protection plan, covers up to ₹50,000 in service charges for any clerical mistake made by our team.
Is there a reliable tax consultant near me in Kondapur?
Yes. Tax Garden's office is in Kondapur itself (CWS One Building, Hanuman Nagar). You can book an in-person consultation or get everything done fully online via WhatsApp and our client portal. We serve walk-in clients by appointment and remote clients across all of Hyderabad and Telangana.
I want a friendly CA who explains things clearly. Is that Tax Garden?
Absolutely. Every client gets a dedicated account manager reachable on WhatsApp, plain-language explanations of what is filed and why, and proactive reminders before every deadline. No jargon, no surprises, just friendly, expert compliance support from Kondapur.
Where is Tax Garden located in Hyderabad?
Tax Garden is located at 4th Floor, South Block, CWS One Building, Hanuman Nagar, Kondapur, Hyderabad, Telangana 500084. We serve clients across Kondapur, HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, and all of Hyderabad.
Can I get GST filing and registration services in Kondapur?
Yes. Tax Garden offers end-to-end GST services from our Kondapur office: GST registration, GSTR-1, GSTR-3B, GSTR-9 annual returns, ITC reconciliation, e-invoicing setup, and GST notice handling for businesses of all sizes in Kondapur and Hyderabad.
Do you file ITR for salaried employees and businesses in Hyderabad?
Yes. Our Kondapur team files ITR for salaried employees, freelancers, consultants, business owners, LLPs, and companies across Hyderabad. We cover ITR-1 through ITR-6 with complete Chapter VI-A deduction reconciliation, AIS reconciliation, and proactive deadline management.
Which areas in Hyderabad does Tax Garden serve?
Tax Garden's Kondapur office serves clients across Hyderabad including HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, Begumpet, Secunderabad, Ameerpet, Kukatpally, Uppal, LB Nagar, and all of Telangana. Most services are available fully online.
What compliance services does Tax Garden offer for startups in Kondapur?
Tax Garden is a compliance partner for startups in Kondapur and Hyderabad's HITEC City corridor. We handle company incorporation, GST registration, TDS filings, payroll, ROC annual filings, director KYC, and annual ITR filing, all under one flat-fee plan.
How is Tax Garden different from traditional accountants and tax firms in Hyderabad?
Unlike traditional accounting practices that charge hourly and are difficult to reach, Tax Garden operates on flat-fee subscription plans with a dedicated account manager, monthly compliance updates, and WhatsApp-first communication. Our AI-powered workflow catches errors before filings are submitted, and Kavach error-protection ensures you are never left alone if something goes wrong.