23 July 2018
We do Purchase Fabric @ 5 % GST as a Raw Material, then our workforce work on it to make it complete Saree. The prices of Finished Saree are in between Rs. 500/- to Rs. 3000/-
In our GST Return we claims ITC of GST paid on Fabric Purchase
We did study that what would be the tax rate on our finished output i.e. Saree.
In one article it was written that GST @ 5% shall be charged on Saree price below Rs. 1000/- and GST @ 12% shall be charged on Saree price on or above Rs. 1,000/-.
In another article it was written that if GST @ 5% is charged on Saree then the Seller can not claim ITC of GST paid on raw material (Fabrics).
In another article it was written that Saree is considered as Fabrics only and hence, all sarees shall be levied GST @ 5% only.
We are very confused. Hence, We request the Experts to put some light on above issue and please clarify the GST Rate.
We asked the above query at CBIC Helpline number, but they didn't respond.
25 July 2018
Great question. Unfortunately all the answers you read in the articles are correct. Taxability and rate of taxes depends upon various factors like classification of products, exemption notification if any, conditions of exemption notification etc. When one of the things changes, rate of tax changes. Let me add another entry... Khadi Saris are tax exempt if sold through KVIC authorised outlets. The best way is to find a good lawyer near you who can help you in taxation matters.
Sari is an article of apparel, which attracts a duty of 12% if sale price is more than Rs. 1000. Tax rate is 5% if sale price is less than Rs. 1000. Earlier in Central Excise regime, certain judgment was passed that sari is nothing but fabric (thereby holding that coversion of fabric into sari does not amount to manufacture), and hence some person may have a view that sari shall attract duty as per the tax rate of fabric.
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