GST on Fabric: Yarn to Finished Textile Overview

From cotton sarees to polyester blends, fabric plays a vital role in India’s textile and fashion industries. Whether you’re a manufacturer, retailer, or consumer, knowing how gst on fabric works is important for pricing, tax compliance, and business decisions.

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    GST Rates

    What is the GST Rate on Fabric?

    Fabrics are generally taxed at a uniform 5% GST rate, regardless of the material type. This low rate was introduced to keep fabrics affordable while still including them in the GST system.

    Fabric Type HSN Code GST Rate
    Cotton fabric 5208–5212 5%
    Silk fabric 5007 5%
    Woollen fabric 5111–5113 5%
    Synthetic/Polyester fabric 5407–5516 5%
    Denim fabric 5209 5%

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    GST on Cotton Fabric

    Cotton is one of the most widely used textiles in India. The cotton fabric gst rate is 5%, whether it’s raw cotton fabric, printed cotton, or blended with a small amount of other fibers.

    • Pure cotton fabrics – 5% GST
    • Cotton blends (minor synthetic mix) – Still 5%

    This ensures that traditional cotton wear remains budget-friendly and promotes domestic handloom sectors.

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    GST on Polyester Fabric

    GST on polyester fabric is also 5%, even though polyester is a synthetic, petroleum-based fiber. Earlier, polyester was taxed higher due to excise duties, but under GST, the rate was reduced to streamline input and output taxes.

    Note: Polyester yarn may attract 12% GST, leading to an inverted duty structure, where input tax is higher than output tax.

    GST for Fabric Businesses

    • GST registration is mandatory if turnover exceeds ₹40 lakhs
    • You must charge 5% GST on sales
    • You can claim Input Tax Credit (ITC) on yarn, dyes, packaging, etc., taxed at 12% or 18%

    However, many small weavers and handloom workers fall under the exemption threshold and are not required to register under GST.

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    GST Return and Invoicing for Fabric

    • Always issue GST-compliant invoices mentioning the HSN code and GST breakup
    • File regular returns (monthly or quarterly based on turnover)
    • Maintain stock and purchase records for ITC claims

    This will help you stay compliant and avoid any tax penalties.

    Conclusion

    By understanding how gst on fabric is applied—whether cotton, silk, or polyester—you can plan better, price right, and stay compliant. Whether you’re in retail or wholesale, these insights help you navigate GST smoothly.

    Frequently Asked Questions (FAQs)

    • What is the GST rate on fabric?
      The standard GST rate on fabric is 5%, across all material types.
    • Is cotton fabric taxed under GST?
      Yes, the cotton fabric GST rate is 5% under HSN codes starting from 5208.
    • What about GST on polyester fabric?
      GST on polyester fabric is also 5%, though polyester yarn may attract higher GST.
    • Do handloom fabrics have special exemptions?
      While handloom fabric is taxed at 5%, small weavers with turnover below ₹40 lakhs may be exempt from GST registration.
    • Can fabric traders claim Input Tax Credit?
      Yes, but they must be GST-registered and ensure proper documentation for claiming ITC on inputs like yarn, dyes, etc.
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