Looking for expert help with Hosiery and garment makers GST rate? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Garments up to Rs 2,500 per piece are 5% GST; above Rs 2,500 they're 18% on the full value (Notification 9/2025-CT(R), Sch I S. Nos. 388-389, Sch II S. Nos. 197-198). The new rate notifications of 27-28 October 2026 don't change this.
- Stitching, knitting and embroidery job work for a registered brand is 5% (S. No. 26(ii)(g) of 11/2017-CT(R), as substituted by 15/2025-CT(R)).
- Most inputs are 5% (knitted fabric, yarn, thread, zips, labels, cartons, sewing machines), but buttons and plastic packing are 18%.
- Composition is open up to Rs 1.5 crore, but only if you never sell outside your State.
- Pay job workers through the bank: cash above Rs 10,000 a day to one person isn't deductible (Section 36(4), Income-tax Act 2025).
What is the GST rate for garment manufacturers? A manufacturer charges 5% GST on knitted or woven garments with a sale value up to Rs 2,500 per piece and 18% on pieces above Rs 2,500, under Notification 9/2025-Central Tax (Rate) in force from 22 September 2025. The rate is fixed piece by piece, so one invoice can carry both rates.
A hosiery unit in Tiruppur or Ludhiana, a kurta maker in Jaipur or a shirt factory in Bengaluru faces the same GST questions: which rate goes on each style, what to charge when you stitch for a brand, and how to handle fabric sent out for embroidery or printing. Many units do both, making their own label and taking job work from bigger brands. This post covers GST rates, registration, composition, job work, exports and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 sections that apply from 1 April 2026. It's written for owners of garment, hosiery and knitting units and the accountants who file for them. If you run a retail clothing shop, our clothing and footwear shop guide fits you better.
What GST rate do you charge on each garment?
The Rs 2,500 line is per piece, and it's the sale value on your invoice that counts. Knitted garments (T-shirts, innerwear, socks, track pants) fall in Chapter 61. Woven garments (shirts, trousers, kurtas) fall in Chapter 62. Both use the same split.
Tax Rate Chart
GST Rates for Garment and Hosiery Units (from 22 September 2025)
Knitted or crocheted garments (Chapter 61) up to Rs 2,500 per piece
9/2025-CT(R) Sch I, S. No. 388
Woven garments (Chapter 62) up to Rs 2,500 per piece
9/2025-CT(R) Sch I, S. No. 389
Knitted or woven garments above Rs 2,500 per piece
9/2025-CT(R) Sch II, S. Nos. 197, 198
Job work on textile products for a registered owner (9988)
11/2017-CT(R) S. No. 26(ii)(g)
Tailoring services
11/2017-CT(R) S. No. 26(vi)
Other process on goods of an unregistered owner
11/2017-CT(R) S. No. 26(vii)
Source: CBIC Notifications 9/2025-CT(R) and 11/2017-CT(R) as substituted by 15/2025-CT(R); CT(R) list checked up to 10/2026-CT(R) (27-28 October 2026), none of which amends these entries
Example: you invoice a retailer for 500 cotton kurtas at Rs 1,800 each and 50 quilted jackets at Rs 3,200 each.
| Line | Value | Rate | GST |
|---|---|---|---|
| 500 kurtas at Rs 1,800 | Rs 9,00,000 | 5% | Rs 45,000 |
| 50 jackets at Rs 3,200 | Rs 1,60,000 | 18% | Rs 28,800 |
| Total | Rs 10,60,000 | Rs 73,800 |
The 18% on the jackets applies to the full Rs 3,200, not just the Rs 700 above the line. A piece at exactly Rs 2,500 stays at 5%, because the entry reads "not exceeding Rs 2500 per piece". Price close to the line with care: a Rs 2,450 style and a Rs 2,550 style differ by Rs 100 in price but Rs 336.50 in GST (Rs 122.50 versus Rs 459).
Our textiles GST rate guide lists fabric and yarn rates in detail.
What GST do you pay on fabric, trims and machines?
Most of what goes into a garment is taxed at 5%, which keeps your credit roughly in line with your output tax. Here are the main items, all from Notification 9/2025-CT(R):
| Input | HSN | Rate | Entry |
|---|---|---|---|
| Knitted or crocheted fabric | Chapter 60 | 5% | Sch I, S. No. 387 |
| Cotton yarn and MMF spun yarn | 5205-5207, 5509-5511 | 5% | Sch I, S. Nos. 333, 347 |
| Cotton and MMF sewing thread | 5204, 5401, 5508 | 5% | Sch I, S. Nos. 332, 340, 346 |
| Textile labels and badges | 5807 | 5% | Sch I, S. No. 370 |
| Embroidery in the piece, motifs | 5810 | 5% | Sch I, S. No. 374 |
| Zips (slide fasteners) | 9607 | 5% | Sch I, S. No. 505 |
| Cartons and boxes of paper | 4819 10, 4819 20 | 5% | Sch I, S. No. 322 |
| Sewing machines, needles and parts | 8452 | 5% | Sch I, S. No. 435 |
| Plastic and metal buttons | 9606 21 00, 22 00, 29, 30 | 18% | Sch II, S. No. 622 |
| Poly bags and plastic packing | 3923 | 18% | Sch II, S. No. 124 |
| Synthetic dyes (for in-house dyeing) | 3204 | 18% | Sch II, S. No. 46 |
When credit builds up. If a big share of your inputs are 18% (buttons, poly packing, dyes for in-house dyeing), your credit can run ahead of 5% output tax. Section 54(3)(ii) of the CGST Act allows a refund of that inverted credit. Garments were never on the barred list in Notification 5/2017-CT(R); that list covered fabrics, and fabrics were taken off it from 1 August 2018 by Notification 20/2018-CT(R). The Rule 89(5) formula counts credit on inputs only, so credit on services and on new machines stays in your ledger. Our inverted duty refund guide walks through the RFD-01 steps.
Registration and the composition scheme
Goods-only units. If you only make and sell your own garments within your State, you can wait until Rs 40 lakh under Notification 10/2019-Central Tax, except in the States that opted out: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand. Those use Rs 20 lakh, or Rs 10 lakh where the special category proviso applies. Section 24 makes registration compulsory from the first inter-State sale of goods, whatever your turnover, and most garment units sell across States. Our registration limit guide has the detail, and our GST registration service files the application for you.
Job-work units. Stitching, knitting or embroidery for others is a service. The Rs 40 lakh option in Section 22(1) is only for suppliers "engaged exclusively in the supply of goods", so a fason or stitching unit registers above Rs 20 lakh.
Composition. Under Notification 14/2019-Central Tax, a unit whose aggregate turnover in the previous year didn't exceed Rs 1.5 crore can opt for composition, or Rs 75 lakh in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand. Garment makers aren't on the excluded list, which covers items such as ice cream, pan masala, tobacco, aerated water and fly ash bricks. A manufacturer pays 0.5% CGST plus 0.5% SGST on turnover (Rule 7, CGST Rules). The catch: you can't make any inter-State supply (Section 10(2)(c)), you can't take input tax credit (Section 10(4)), and your buyers can't take credit either. It suits a small unit selling to local shops and customers. It rarely suits one supplying brands or retailers. Our composition scheme guide covers the conditions.
Job work: when you stitch for a brand, and when you send fabric out
Garment units sit on both sides of job work. You may stitch for a brand that sends you cut fabric, or send your own fabric out for embroidery, printing or washing.
When you're the job worker. Section 2(68) of the CGST Act defines job work as a process on goods "belonging to another registered person". Stitching, knitting, embroidery or finishing for a registered brand is 5% on your charges, not on the fabric's value. Tailoring services are also 5% under item (vi). Other processes on goods of an unregistered owner, such as printing or washing for a boutique without GSTIN, fall under item (vii) at 18%. Ask every customer for their GSTIN before you quote.
Step-by-Step Guide
Sending Fabric Out for Embroidery, Printing or Stitching
Issue a delivery challan
Send the fabric or cut pieces without tax under a delivery challan (Rule 55, CGST Rules). Your credit on that fabric stays with you (Section 19).
E-way bill for inter-State moves
For an inter-State consignment to a job worker, you or the registered job worker generate the e-way bill whatever the value (Rule 138(1), proviso).
Bring the goods back within one year
Inputs must return, or be supplied from the job worker's premises, within one year (Section 143(1)). If not, they're treated as supplied by you on the day they were sent (Section 143(3)).
Job worker bills its charges
A registered job worker charges 5% on the processing charges and quotes your GSTIN. You take credit on that bill.
File ITC-04
Report goods sent and received: half-yearly by 25 October and 25 April if annual turnover exceeds Rs 5 crore, otherwise yearly by 25 April (Rule 45(3)).
Source: CGST Act Sections 2(68), 19 and 143; CGST Rules 45, 55 and 138; Notification 15/2025-CT(R)
Our job work GST guide covers the challan format and the rules for waste and scrap. If you send fabric for dyeing, our dyeing and printing units guide explains how those units bill you.
Exports. Export of goods is a zero-rated supply (Section 16(1)(a), IGST Act). Under Section 16(3), you can export under a Letter of Undertaking without paying IGST and claim a refund of the unutilised credit on fabric, trims and services. Our export refund guide covers the LUT filing and RFD-01 steps. If your aggregate turnover in any year since 2017-18 crossed Rs 5 crore, your B2B and export invoices must be e-invoices (Notification 10/2023-Central Tax); see our e-invoicing guide.
Income tax for garment and hosiery units
TDS when you pay job workers. Stitching or embroidery done to your order is "work" under a contract. If your unit is a company, firm, co-operative or other designated person, deduct TDS under Section 194C of the 1961 Act for FY 2025-26, and Section 393(1), Table Sl. No. 6(i) of the 2025 Act from 1 April 2026. A proprietor or HUF must deduct only if its business turnover exceeded Rs 1 crore in the previous year (Section 402(11)(l) of the 2025 Act). The rate is 1% for an individual or HUF job worker and 2% for others, once one bill exceeds Rs 30,000 or the year's payments exceed Rs 1,00,000. Say a stitching contractor who isn't registered for GST bills your firm Rs 45,000 for one lot: you pay Rs 44,550 and deposit Rs 450 as TDS. Our Section 194C guide covers the rules, and our TDS filing service files the quarterly returns.
Cash payments to tailors. Many units pay piece-rate tailors and small contractors in cash. Under Section 36(4) of the 2025 Act, any expense paid to one person in cash above Rs 10,000 in a day isn't deductible. Pay by bank transfer or UPI, and keep a wage register for piece-rate workers. A stitching floor with many workers also needs PF and ESI handled properly; our payroll management service runs it.
Extra depreciation on new machines. Section 33(8) and (9) of the 2025 Act give a manufacturer additional depreciation on new plant or machinery, on top of normal depreciation. Example: you install a new circular knitting machine costing Rs 20,00,000 in tax year 2026-27. If it's put to use for 180 days or more that year, the additional deduction is 20%, so Rs 4,00,000. If it's put to use for less than 180 days, you get Rs 2,00,000 this year and Rs 2,00,000 next year. Second-hand machines, office appliances and road vehicles don't qualify.
Section 44AD. For FY 2025-26, a resident individual, HUF or partnership firm (not an LLP) can declare 6% of turnover received by bank transfer, UPI or account payee cheque, and 8% of the rest, under Section 44AD of the 1961 Act. The limit is Rs 2 crore, or Rs 3 crore if cash receipts don't exceed 5% of turnover. From 1 April 2026 it's Section 58(2), Table Sl. No. 1 of the 2025 Act. A unit with turnover of Rs 1,80,00,000, all received by bank, declares at least Rs 10,80,000 under 44AD. Our Section 44AD guide explains the five-year lock-out if you opt out.
Tax audit. Accounts must be audited if turnover exceeds Rs 1 crore, or Rs 10 crore where cash receipts and cash payments each stay within 5% (Section 44AB of the 1961 Act; Section 63(1) of the 2025 Act).
Paying MSE suppliers late. If your fabric or trims supplier is a micro or small enterprise, paying later than the time limit in Section 15 of the MSMED Act, 2006 means you can't deduct that bill until the year you pay it (Section 43B(h) of the 1961 Act; Section 37(2)(g) of the 2025 Act). Our Section 43B(h) guide has the detail.
Comparison
Own-Label Garment Maker vs Stitching Job Worker
| Parameter | Selling your own garments | Stitching for a registered brand |
|---|---|---|
| What you supply | Goods (Chapters 61, 62) | Service (heading 9988) |
| GST rate | 5% up to Rs 2,500 a piece, 18% above | 5% on your charges |
| Registration limit | Rs 40 lakh where allowed; any inter-State sale | Rs 20 lakh (Rs 10 lakh in special category States) |
| Composition | Possible up to Rs 1.5 crore, intra-State only | Not open to a mainly job-work unit (Section 10(2)(a)) |
| TDS on your receipts | 0.1% above Rs 50 lakh from a buyer with turnover over Rs 10 crore: Section 194Q / 393(1) Sl. No. 8(ii) | 1% or 2%: Section 194C / 393(1) Sl. No. 6(i) |
| ITC-04 | You file it if you send goods out | Filed by the brand |
Source: CGST Act Sections 2(68), 10, 22, 24; Notifications 9/2025, 11/2017, 15/2025-CT(R) and 14/2019-CT; Income-tax Act 1961 Sections 194C, 194Q; Income-tax Act 2025 Sections 393 and 402
Common mistakes garment units make
- Charging 5% on the whole invoice. The rate is per piece. Styles above Rs 2,500 on the same bill go at 18%.
- Taxing only the excess over Rs 2,500. A Rs 2,600 piece is 18% on Rs 2,600.
- Opting for composition and then selling to another State. Section 10(2)(c) bars any inter-State supply under composition.
- Billing an unregistered boutique at 5% for printing or washing. Job work needs a registered owner; other processes for an unregistered owner are 18%.
- Losing track of fabric at job workers. Inputs not back within one year are treated as supplied by you. Keep a job work register and file ITC-04 on time.
- Paying piece-rate tailors in cash. Payments above Rs 10,000 a day to one person lose the deduction.
How Tax Garden helps garment and hosiery units
We register your unit, set up billing that applies 5% or 18% per style, keep your job work challans, e-way bills and ITC-04 in order, and file GSTR-1 and GSTR-3B through our GST return filing service. For exporters, we file the LUT and the refund of unused credit. On the income tax side, we deduct and file TDS on job worker payments, claim extra depreciation on new machines and file your return through our ITR filing service, with books kept by our accounting and bookkeeping service. Call or WhatsApp us on 9640290977.
Related reading: Spinning mills guide | Handloom weavers guide | Tailors and boutiques guide | Dyeing and printing units guide
