GST Rate & HSN Code: Articles of Apparel and Clothing Accessories

HSN is an abbreviation for the Harmonized System of Nomenclature. The WCO (World Customs Organization) established HSN in 1988. Since then, five adjustments have been made all over the world. More than 5000 items are listed in the HSN code, used in more than 150 countries. This 6-digit HSN code can be used to identify over 5,000 different commodities and can also be used to define tax aims. Later, Customs and Central Excise added two extra digits to the HSN code to classify goods under GST. Therefore, let's know more about readymade garments HSN code, clothing HSN code and more, along with their GST rates in this article.

Use of HSN Code and GST

• The WCO presently monitors more than 95% of the industry. 
• Following the establishment of the Goods and Service Tax (GST), India's enactment of the HSN code puts the country on a level with other countries using HSN for years. 
• To standardise GST, India used the HSN code. This has also reduced the cost of international trade by bringing trade processes closer together. 
• The HSN encourages every Indian taxpayer to look into the GST rate by using the code. 
• As a result, the system automatically computes the GST tax rate applicable to the products, shortening and clarifying India's trade-related techniques. 
• The correct search HSN codes must be considered throughout the GST Return filing process.

Fundamentals of HSN Codes and GST

HSN Codes- There are 2 digits codes, 4 digits codes, 6 digits codes, and 8 digits codes under the present Harmonised System of Nomenclature (HSN) adopted by the Indian Government.

GST- The GST council fixes five types of Goods and Services Tax (GST) rates for all kinds of products or services. These are:

1. 0%
2. 5%
3. 12%
4. 18%
5. 28%

Importance of HSN Code

The adoption of the HSN Code system in the country is important due to the following reasons:

1. It helps the business community in the country to properly understand the domestic and international market and their products.
2. It helps in the import and export of various products and services smoothly. This is because the Customs authorities worldwide can easily identify the goods by checking the HSN Code, thereby, proper implementation of duty/tax can be incorporated
3. It helps the Government to understand the demand and supply position of various goods and services within the country in a better manner.
4. It also helps the Government understand the need for import or export of goods of a particular type of essential items or goods and services in general and formulate the policies for regulating the trade flow of goods with different countries of the world in a better way.
5. It also helps in the systematic collection of data of various products and services for statistical purposes. The government can use these data, the public, or a business or student community for different needs and utilisation.

How does HSN work for different businesses?

The Government has prescribed the following guidelines for the use of 2 digits or 4 digits or 6 digits or 8 digit codes by the trade and industry in India:

1. There is no need to adopt or use any HSN code by the business entity if the annual turnover is less than Rs. 1.50 Crores. However, it is advisable to use 2 digits or 4 digits code for better synchronisation with the GST system of the Government for smooth filing of Returns or other information on the GST Portal.
2. If the business turnover is Rs. 1.50 Cr. or more but less than Rs. 5.00 Crore, it is mandatory to use a minimum of 2 digits HSN Code, but the business entity can use 4 digits or higher code as well.
3. If the business turnover is Rs. 5.00 Cr. or more, it is mandatory to use a minimum of 4 digits HSN Code, but the business entity can also use 6 digits or higher code.
4. It is always advisable to use 8 digits code for import and export-related transactions for better understanding by the Customs Authorities worldwide.

Where is HSN Code present in different documents?

It is mandatory to write HSN Code on various business documents such as:

1. On every Invoice against the Item name or product/service description.
2. On all GST Returns and forms, wherever it is mentioned to write HSN Code.
3. On all purchase orders containing the details of items/products being given to Suppliers.
4. On all export documents like Tax Invoice, Commercial Invoice, Shipping Bill, Certificate of Country of Origin, etc.
5. On Bill of Entry (BOE) at the time of import of goods at the relevant place.
6. On any other document(s) as may be prescribed by the Government.

Also Read: List Of Goods Exempted Under GST in India with HSN Code

GST Rate and HSN Code: For Articles of Apparel and Clothing Accessories, Knitted or Crocheted

The Government has prepared an HSN Code list for the levy of GST on different products and services. Let us examine the HSN code list for various apparel and clothing accessories, knitted or Crocheted as under.

These items fall under Chapter 61 with the following subheadings:

Thus, Chapter 61 of the HSN Code list deals with GST on Clothes in India, and most of these rates are effective from 01.07.2017, i.e., the date of introduction of the GST regime in the country. There are further subdivisions of these chapter headings into 8 digit codes. These clothes are divided into different categories based upon the material or fabric used in their preparation, like cotton, silk, wool, animal hair, synthetic fibre, etc.

Disclaimer: The clothes GST rates and HSN Code list is given above are based upon the latest available information. However, the reader must reconfirm the same from the official website of the Government of India before entering into any business transaction to see if there is any change in the GST rate or HSN Code list.

However, there is an important point to be noted that in the recent steps taken by CBIC a rate hike has been announced on man-made fabrics, yarn, fabric which will be effective from 01.01.2022. 

• As per this latest amendment, the GST Rate on fabrics has increased from 5% to 12% whereas GST on apparel of any value has also increased to 12%. 
• Previously, garments up to ₹1000 were subject to 5% GST. The GST rate for textiles, which include synthetic yarn, fabrics, and other man-made items has increased to 12% from the previous 5%.

Also Read: How HSN And NIC Codes Help Your General Stores

Conclusion

HSN codes play a crucial role in classifying goods worldwide in a systematic and logical manner. In this article, we have identified that a GST rate of 5% is applicable for clothes having sales price up to Rs. 1000/- per piece and a GST rate of 12% is applicable for clothes having a sales price of more than Rs.1000/- per piece. However, effective 01.01.2022, the revised GST rates on fabrics has increased from 5% to 12% whereas GST on the apparel of any value has also increased to 12%. Therefore, understanding HSN Codes and their GST rates and their use can aid individuals involved in the business of manufacturing or trading clothes.

We hope the article has given you the relevant information regarding GST on Clothes in India, HSN Code for Garments, etc.

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