FAQ released by CBEC on Textiles

Q 9. I have manufacturing unit of Cotton trouser where customer gives me fabric and I have
to convert it into trouser. What would be the rate applicable on me 5 % or 18 %.
Ans. The services provided by you fall under the category of job work by virtue of the
definition of job work provided under Section 2 (68) of the CGST Act. As per the rate
schedule, the rate for job work in relation to wearing apparels is 18%. However, the rate
for job work in relation to textile yarns (other than Man Made Fibre/Filament) and textile
fabrics is 5%.
Therefore, there are following two options available to you:
(i) Pay tax at the rate of 18% on whole amount of job work charges.
(ii) Alternatively, you may raise 3 invoices. One relating to cutting wherein you would
pay tax at 5%. Second invoice relating to the material procured by you for job work
process on which no tax would be payable. Third invoice for stitching and further
processing on which tax at the rate of 18% would be payable.
However, one major issue is that at what stage does the process of providing service
relating to wearing apparels start.

Q 13. There is a gross confusion on the tax applicable for Embroidered Sarees and Fabric. Typically, principal manufacturers supply fabric / Sarees to Job workers and get
various embroidery designs done on the fabric / sarees. We understand that the textile jobworker would charge an output supply GST of 5% on the composite jobwork supply. This
embroidery fabric/saree are then sold by the principal manufacturers to wholesale and retail
sellers. What would be the output GST applicable on such Embroidered fabric/sarees when the same is sold by the principal manufacturer?

Ans. As per the rate schedule, the rate of 5% would be chargeable on the job process relating to the textile yarns (other than Man Made Fibre/Filament) and Fabrics. Sarees till now under the Central Excise Act has been treated as Fabrics and where therefore, exempt
from the payment of Central Excise Duty. Further, CBEC has recently clarified that even after stitching, embroidery work and fixing of falls, a saree remains fabrics only as no new item emerges having distinct name, character and use. Stitching of two or more different kinds of fabrics also does not take away its classification. Therefore, the sarees whether embroided or not would be taxed at the same rate at which the fabric is taxed.

Q 15. What is the difference between Fabric and Made-ups. Whether Shawl is a fabric or apparel or made-up. What is the rate on Shawls.

Ans. Fabric is the cloth made out of yarn by weaving or knitting. Fabrics are made in
running length and packed in rolls. Whereas made-ups are the fabrics which have been
further worked upon but not stitched into usable garments like semi-stitched suit pieces in
which the neck design is already made. Since, shawls are also made in running length and
distributed in rolls, they can be classified as fabrics. However, if shawls are stitched to form poncho cape shawl wrap, they may be classified as made up. Shawls have not been classified separately in the GST rate schedule. Therefore, when sold directly by cutting
from the roll, they should be taxed at the rate of 5% and when sold as single units or ponchos, they may be taxed as made-ups.

Q 16. Dress material are sold by length. They can include upto 3 pieces. These can be plain or
embroidered (value-addition or further worked upon). Where should dress material be classified?

Ans. Dress sets have been classified under heading 6307 and the rate of tax on the dress
materials/patterns is similar to the apparels i.e. for dress material of sale value not exceeding Rs. 1000, tax at 5% would be charged and for dress material of sale value exceeding Rs. 1000, tax at 12% would be charged.

Q 19. We are small traders of textile dealing in Suiting, Shirting, Sarees, Dress Material,
Blankets, Dhoti etc.We have some queries regarding implementation of GST from 1stJuly
2017.
a) What will be the status of opening Stock of Textile items. Will 5% be added on closing stock as on 30th June 2017?
b) What is the GST rates in Fabrics, as there are various types of fabrics like cotton, synthetics, man-made fabrics, acrylic, Mixture of cotton and other fabrics etc. Will there be flat rate of 5% on all fabrics or different rate?
c) Please provide clarification on HSIN number. Is it mandatory to quote in invoice by
B2C traders & B2B traders? Further there are various codes in one type of item, would it not attract confusion among traders?
d) As per news in CNBC, input tax credit would not be allowed in textile for some period? Please clarify.
e) Is Rs 1000/- bracket for 18% rate applicable on Sarees and suit lengths or will it
attract flat rate?

Ans. (a) Since you are a trader, you will need to supply your stock on payment of GST @5%. However, 40% of the GST paid i.e. 2% will be available to you as credit on filling Form GST TRAN-02.
(b) GST rate on fabric is flat 5% irrespective of composition.
(c) Upto Rs. 1.5 cr turnover, no HSN code is required to be mentioned. For those having turnover of Rs. 1.5 to 5 Cr, first 2 digit of the HSN code are required i.e. the chapter number. Only those who have turnover above Rs. 5 Cr are required to mention 4 digits of the HSN code. You will start getting the HSN code in your supplier's invoice, so it would not cause any issues once the supplies under new regime take place.
(d) There is no such provision.
(e) Value of sale linked GST rate is only for garments and not for sarees and suit lengths.

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