Cotton HSN Code: Everything You Need to Know
Cotton products cover raw cotton, yarn, fabrics and ready garments like shirts and bedsheets. Each stage of cotton processing uses a different HSN code, which also affects the GST rate. This guide explains how cotton is classified from fibre to finished cloth so that traders and manufacturers can bill correctly.
How Cotton HSN Code Impacts Textile Industry?
Cotton moves through many hands in the textile chain, starting from ginners and spinners to weavers, processors and garment makers. At every stage, use of the correct cotton HSN code keeps purchase and sales records consistent. Wrong codes can create a mismatch between suppliers and buyers when returns are filed.
Basic cotton items that are not branded and are sold at lower value often fall in a lower GST slab. Value added garments, branded products and special coated fabrics usually come under the standard GST slab. Understanding the mapping for your product line helps you quote the right price to customers.
| HSN Code | Product name | Product description | GST rate |
|---|---|---|---|
| 5201 | Raw cotton | Seed cotton, ginned or unginned supplied by farmers or ginners | 5% |
| 5205 | Cotton yarn | Single or multiple cotton yarn for weaving or knitting | 5% |
| 5208 | Woven cotton fabrics | Unprocessed cotton fabric used by garment units and processors | 5% |
| 6105 | Cotton shirts and tops | Ready cotton garments like shirts and tops sold in retail | 5% |
Types of Cotton Fabrics and Their HSN Codes
Different cotton fabrics such as poplin, cambric, denim, drill and voile come under the broader headings for woven or knitted cotton fabric. The exact HSN code depends on factors like weight, construction and whether the fabric is unprocessed, bleached or dyed.
Exporters and large mills usually maintain detailed fabric catalogs with exact HSN codes for each quality. Smaller traders can still keep things simple by grouping regular grey and finished cotton fabrics under the correct heading for woven cotton fabrics.
Cotton Shirts and Their Tax Classification
Once cotton fabric is cut and stitched into shirts, kurtas or other garments, the goods move from fabric headings to garment headings. Here, GST depends on sale price per piece and whether the goods are branded or unbranded. Low priced unbranded items often fall in a lower slab, while premium branded clothing is taxed at the standard rate.
Garment makers should set up separate items in software for fabric and for finished garments. Using the cotton garment HSN code on every invoice helps in clear reporting of outward supplies and avoids confusion during departmental checks.
Conclusion
Cotton HSN code changes as cotton moves from raw fibre to yarn, fabric and ready garments. Using the right code at each step helps spinners, weavers, processors and garment brands charge the correct GST rate. With proper classification, the textile chain remains smooth and GST credits flow without blockage.
I am a Fellow Chartered Accountant (FCA) and LLB graduate with 10 years of experience in corporate auditing, taxation, and financial consulting. My expertise includes corporate audits, income tax planning, HSN code classification, and GST rate advisory. Through my blogs and articles, I aim to simplify corporate taxation, auditing, and GST compliance, making financial matters more accessible for professionals and business owners.
Frequently Asked Questions
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What is the HSN code for cotton fabric?
Regular woven cotton fabrics are usually classified under HSN code 5208 or related headings, depending on weight and processing. Most grey and finished cotton fabrics used for daily wear garments fall in this family.
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Does cotton clothing have a separate HSN code?
Yes, cotton garments like shirts, trousers and dresses use garment HSN codes under chapters for apparel rather than fabric codes. These codes depend on whether the garment is knitted or woven and whether it is for men, women or children.
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How is cotton shirt taxed under GST?
Cotton shirts are taxed as ready garments based on their sale value and branding status. Lower value unbranded shirts may get a lower GST slab, while higher value or branded shirts generally attract the standard rate.
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What are the benefits of knowing the cotton HSN code for business owners?
Correct cotton HSN codes help businesses maintain accurate item masters, price lists and tax workings. They also reduce disputes with buyers and make it easier to match inward and outward supplies in GST returns.
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How is cotton classified differently under HSN?
Cotton is classified separately as raw cotton, cotton yarn, cotton fabrics and cotton garments. Each category has its own HSN heading and GST treatment, which is why proper classification is important.