Readymade Khadi garments sold through KVIC, not exempt from GST: AAR Rajasthan

Categories: Advance Ruling
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Facts:

M/s. Udyog Mandir (“the applicant”) is a manufacturer of Khadi garments. The Applicant buys khadi fabric from the market and get those fabric stitched and makes own garment.

Issues Involved:

Whether khadi readymade garments to be included under the entry of khadi fabric under chapter 50 to 55 of GST classification? If not, then what is the correct classification and rate of tax on khadi fabric readymade garments?

Observation and findings:

The khadi fabrics sold through Khadi and Village Industries Commission (KVIC) and KVIC certified institution/outlets has been made exempt from tax vide Notification No. 28/2017-Central Tax (Rate) by inserting entry at Sl. no. 130A in Notification No. 02/2017- Central Tax (Rate) dated June 28, 2017 (“Exemption Notification”).

The exempted entry covers only “Khadi fabrics sold through Khadi and Village Industries Commission (KVIC) and KVIC certified institution/outlets”, it doesn’t cover khadi readymade garments.

Held:

The Hon’ble AAR, Rajasthan vide Advance Ruling No. RAJ/AAR/2019-20/01 dated April 16, 2019 ruled that, khadi readymade garments are not covered within the virtue of Sl. no. 130A of Exemption Notification and hence not exempted from GST.

Further held that khadi garments will be classified under chapter heading /tariff item 62, as per Notification No. 01/2017- Central Tax (Rate) dated June 28, 2017 will attract GST as follows:

  1. If the sales value of a readymade khadi garments manufactured by the applicant is less than Rs.1000/- will attract GST @ 5%.
  2. If the sales value of a readymade khadi garments manufactured by the applicant is less than Rs.1000/- will attract GST @ 12%.

Citation: [TS-341-AAR-2019-NT]

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