Is a salwar/churidar-kurta set comprising three pieces — top, bottom and dupatta
— just fabric or articles of apparel? This was the question before the
Authority for Advance Ruling of Tamil Nadu (AAR-TN) to determine the
rate of Goods & Services Tax (GST).
AAR-TN ruled that completely unstitched sets will be classified as ‘fabrics’ and attract five per cent
GST, just embroidery or embellishment will not make any difference to it. However, partially stitched will make it ‘Article of Apparel’ and it will accordingly attract GST at the rate of 5 per cent (for sale value less than ₹1,000) or 12 per cent (for sale value more than ₹1,000).
According to Anita Rastogi, Partner (Indirect Taxes) at PwC, this is a classic example where multiple rates lead to classification issues. “One of the objectives of the GST was to do away with huge litigation faced under old regime largely due to different tax rates for different products. Going forward, the government should look at rationalising the rate structure under GST,” she said.
Palayamkottai, Tamil Nadu-based RmKV Fabrics approached AAR to get an advance ruling on classification of three piece salwar/churidar-kurta-dupatta sets. It wanted to know whether the three piece set would be classifiable as ‘fabrics’ and attract only 5 per cent GST or they would be classifiable as ‘Articles of Apparel’ and attract 5 per cent GST if their sale price is below ₹1,000 and attract l2 per cent GST if their sale price is more than ₹1,000.
The AAR decision is binding on the applicants and the jurisdictional tax authority. Though such a decision does not have precedent value like that of a High Court or Supreme Court judgment, it can be used as persuasive tool in future cases.
In this case, the applicant put forward four models to determine ‘fabrics’ or ‘Article of Apparel.’ The first model has unstiched top and bottom where top is merely cut into size. The second model comprises top semi-stitched and bottom unstitched. The third model has top stitched, but bottom unstitched. Finally, the fourth model has top and bottom unstitched, but only the neck portion is cut and design is made — which meant partial stitching. However, in all the cases, the fabrics themselves could have some embroidery work/hemming or embellishments on them. The applicant further said the sets in question comprise three pieces of fabric and in some of them certain degree of stitching or neck work is done. These items cannot be worn as such and requires further stitching according to the measurement of the user and then ultimately stitched into a complete set. They are essentially in the form of fabric and have not attained the characteristics of an article like a readymade shirt or pant.
AAR-TN ruled that completely unstitched sets will be classified as ‘fabrics’ and attract five per cent
GST, just embroidery or embellishment will not make any difference to it. However, partially stitched will make it ‘Article of Apparel’ and it will accordingly attract GST at the rate of 5 per cent (for sale value less than ₹1,000) or 12 per cent (for sale value more than ₹1,000).
According to Anita Rastogi, Partner (Indirect Taxes) at PwC, this is a classic example where multiple rates lead to classification issues. “One of the objectives of the GST was to do away with huge litigation faced under old regime largely due to different tax rates for different products. Going forward, the government should look at rationalising the rate structure under GST,” she said.
Palayamkottai, Tamil Nadu-based RmKV Fabrics approached AAR to get an advance ruling on classification of three piece salwar/churidar-kurta-dupatta sets. It wanted to know whether the three piece set would be classifiable as ‘fabrics’ and attract only 5 per cent GST or they would be classifiable as ‘Articles of Apparel’ and attract 5 per cent GST if their sale price is below ₹1,000 and attract l2 per cent GST if their sale price is more than ₹1,000.
The AAR decision is binding on the applicants and the jurisdictional tax authority. Though such a decision does not have precedent value like that of a High Court or Supreme Court judgment, it can be used as persuasive tool in future cases.
In this case, the applicant put forward four models to determine ‘fabrics’ or ‘Article of Apparel.’ The first model has unstiched top and bottom where top is merely cut into size. The second model comprises top semi-stitched and bottom unstitched. The third model has top stitched, but bottom unstitched. Finally, the fourth model has top and bottom unstitched, but only the neck portion is cut and design is made — which meant partial stitching. However, in all the cases, the fabrics themselves could have some embroidery work/hemming or embellishments on them. The applicant further said the sets in question comprise three pieces of fabric and in some of them certain degree of stitching or neck work is done. These items cannot be worn as such and requires further stitching according to the measurement of the user and then ultimately stitched into a complete set. They are essentially in the form of fabric and have not attained the characteristics of an article like a readymade shirt or pant.
No comments:
Post a Comment