GST Guide for Textile Sector: Wholesalers, E-commerce & Retailers

GST & Textiles — Practical Guide for, Wholesalers, E-commerce Sellers and Retailers

Introduction : Textile business owners often ask: What is the GST rate on fabrics and garments? How do recent GST rate changes affect my margins? Does e-invoicing apply to small manufacturers? If I sell via Amazon or my own website, who collects tax — me or the marketplace? This article answers those questions for manufacturers, wholesalers, e-commerce sellers and shopkeepers in the textile value chain. It explains recent rate rationalisations, procedural changes (e-invoicing, TCS), applicable sections/rules/forms and gives practical compliance checklists and working examples to reduce disputes and improve cash flow.

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1. Textile sellers operating through third-party marketplaces such as Amazon or Flipkart must pay particular attention to the TCS provisions of Section 52. E-commerce operators collect TCS, presently notified at 0.5 per cent in many cases, and deposit it to the government. The operator files Form GSTR-8 and provides the seller with a TCS statement. The seller must claim this TCS credit in its own GSTR-3B and reconcile the credit with the amount reflected in Form 26AS and the marketplace’s settlement reports. Daily settlement files—covering gross sales, returns, fees and TCS deductions—should be reconciled with outward supplies disclosed in GSTR-1. Where B2B supplies are routed through a marketplace and the seller’s turnover exceeds the e-invoicing threshold, the seller remains responsible for generating an IRN and ensuring that the marketplace records the IRN in its own settlement data.

2. Businesses that sell through their own websites without using a marketplace must themselves collect and remit GST under Section 9. TCS by e-commerce operators does not apply, but these businesses must still reconcile payment-gateway reports with their sales ledger and GSTR-1, and classify each transaction correctly as B2B, B2C or export. For exports, maintain the Letter of Undertaking (LUT) or apply for refund of accumulated ITC under Sections 54 and 55. If e-invoicing thresholds are crossed, direct sellers must integrate their shopping-cart or ERP platform with the IRP to generate IRNs automatically.

Q&A

Q1. What is the revised GST rate for readymade garments and made-ups?

5% GST on garments/made-ups up to ₹2,500 per piece (earlier limit ₹1,000) – beyond ₹2,500, 12% applies. (Excluding certain HSN codes other than 63053200, 63053300, 6309).

Q2. What are the new rates for man-made fibres (MMF) and yarns?

Fibres: 18% → 5%; Yarns: 12% → 5%. This aligns fibre–yarn–fabric rates and removes inverted duty structure.

Q3. What are the revised rates for carpets and floor coverings?

Under HS 5701–5705, rate reduced from 12% to 5%.

Q4. What about handicrafts and handloom items?

36 notified handicraft items and cotton rugs/handwoven carpets under HS 5705: 12% → 5%.

Q5. Sewing machines (HS 8452)?

GST reduced from 12% to 5% on domestic and industrial sewing machines.

Q6. If a textile seller sells through Amazon/Flipkart, what TCS applies?

E-commerce operator must collect TCS @ 0.5% (0.5% CGST + 0.5% SGST or 1% IGST) on the net value of taxable supplies.

Q7. Which form shows TCS details?

Operator files Form GSTR-8 monthly; the TCS credit reflects in the seller’s electronic cash ledger.

Q8. How does the seller claim TCS credit?

Claim it in GSTR-3B (Table 5), matching with the amount reflected in Form 26AS and in the operator’s GSTR-8.

Q9. Does TCS apply on sales through own website?

No. Section 52 TCS applies only when the sale is facilitated by a registered e-commerce operator.

Q10. How to handle old stock bought at 12% if now rate is 5%?

Sell at the current output rate (5%); full 12% ITC remains available. No reversal is required.

Q11. If turnover crosses the e-invoicing threshold, what must be done?

Generate Invoice Reference Number (IRN) via the Invoice Registration Portal as per Rule 48(4). The GST rate on goods remains the same; e-invoicing is only a documentation requirement.

Q12. If goods are exported (e.g., handlooms), which form and rate apply?

Export is zero-rated under Section 16 of the IGST Act; file with LUT (Rule 96A) or pay IGST and claim refund in RFD-01.

Q13. For small retailers choosing composition scheme, which rate applies?

Composition scheme dealers pay 1% of turnover (0.5% CGST + 0.5% SGST) and cannot claim ITC; they cannot charge 5%/12% on invoices.

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Disclaimer: The contents of this article are for general informational and educational purposes only and do not constitute professional tax, legal, or accounting advice. While care has been taken to ensure accuracy, readers should note that GST laws, rates, notifications, circulars, and compliance requirements are subject to change. Businesses should consult a qualified Chartered Accountant, GST practitioner, or legal advisor for advice tailored to their specific circumstances. The author or publisher accepts no liability for any loss or damage arising from reliance on the information provided herein.