Say you run a saree and dress-material trading firm on Ring Road in Surat. On Monday a buyer from Jaipur asks for 200 lehengas at ₹2,600 each, and a retailer in Nagpur wants 4,000 metres of dyed polyester fabric. The GST on those two orders is not the same. The fabric goes out at 5%. The lehengas go out at 18%, because each piece is priced above ₹2,500.
That is the short answer for 2026. Most fabrics, yarns and fibres sit at 5%, textile job work is taxed at 5%, and readymade garments and made-ups are 5% up to ₹2,500 a piece and 18% above it. These rates have applied since 22 September 2025. What changed this month is how you can give discounts after a sale and how quickly inverted duty refunds come back, and both matter in a market that runs on credit and rate negotiation.
This guide covers the current rates, how ITC works across the grey-to-finished chain, the job work rules for process houses and embroidery units, and a worked example in rupees.
What are the GST rates on textiles in 2026?
The 56th GST Council meeting on 3 September 2025 cut the rates on man-made fibre and yarn, so the polyester chain finally lines up from fibre to fabric. The new rates took effect on 22 September 2025 and are still current.
Item | GST rate now | Before 22 Sept 2025 |
|---|---|---|
Man-made fibre (polyester, viscose staple fibre) | 5% | 18% |
Man-made yarn (filament and spun yarn) | 5% | 12% |
Most woven and knitted fabrics, including grey fabric | 5% | 5% (a few at 12%) |
Job work on textiles and textile products | 5% | 5% |
Garments and made-ups, sale value up to ₹2,500 per piece | 5% | 5% only up to ₹1,000 |
Garments and made-ups, sale value above ₹2,500 per piece | 18% | 12% |
Check the rate for your exact product on the CBIC GST rate finder. A few specialised fabrics and accessories have their own entries, and the HSN on your invoice is what an officer will test the rate against.
How does the ₹2,500 per piece rule work for garments?
The rate depends on the sale value of each piece, not the bill total. A bill for 50 kurtis at ₹2,200 each comes to ₹1,10,000, and every kurti is still taxed at 5%. A single lehenga billed at ₹2,550 is taxed at 18%.
Three points cause most of the arguments we see with clients:
The test uses the taxable value per piece, before GST. A ₹2,450 lehenga becomes ₹2,572.50 after 5% tax, and the tax does not push it over the line.
A discount printed on the invoice reduces the value. A list price of ₹2,800 with a ₹350 trade discount on the bill gives a taxable value of ₹2,450, taxed at 5%.
A discount given later by credit note reduces the tax, but the rate was fixed when you raised the invoice. In our view it does not move a piece from 18% back to 5%.
Case | Taxable value per piece | Rate | GST | Invoice value |
|---|---|---|---|---|
A: lehenga billed at ₹2,450 | ₹2,450 | 5% | ₹122.50 | ₹2,572.50 |
B: lehenga billed at ₹2,600 | ₹2,600 | 18% | ₹468.00 | ₹3,068.00 |
C: list ₹2,800 less ₹350 discount on the invoice | ₹2,450 | 5% | ₹122.50 | ₹2,572.50 |
The ₹150 price gap between A and B costs the buyer ₹495.50 more per piece. On the Jaipur order of 200 pieces, that is ₹99,100. Surat’s lehenga and bridal-wear traders felt this change hardest, because many pieces start close to ₹2,500. If your price list clusters near that number, price deliberately on one side of it and show the per-piece value clearly on every invoice line.
How does ITC flow from grey fabric to finished fabric?
With fibre, yarn, fabric and job work all at 5%, the main polyester chain no longer piles up credit the way it did when yarn was taxed at 12% and fabric at 5%. For a trader the picture is usually simple: GST paid on grey fabric purchases plus GST charged by the process house, set off against GST on finished fabric sales.
Credit still builds up where inputs or services carry 18% and your output is 5%. Packing material, rent, machinery repairs and professional fees fall here. Weavers and processors who buy dyes, chemicals and spares at 18% feel it more than traders do.
Two rules decide whether you can actually use that credit:
The supplier must report the invoice in GSTR-1 so it appears in your GSTR-2B. A broker-arranged purchase from a weaver who files late is the most common gap we find in textile books.
You must pay the supplier within 180 days of the invoice date. If you do not, the credit has to be added back to your output tax, and interest can apply, until you pay. Watch older purchases closely.
What changed for discounts and refunds from 1 November 2026?
Amendments to Sections 15, 34 and 54 of the CGST Act came into force on 1 November 2026 through Notification No. 03/2026-Central Tax dated 26 October 2026. Two of them matter to textile traders.
Post-sale discounts. Until October, a discount given after the sale reduced GST only if it had been agreed at or before the time of supply and was linked to specific invoices. Most market discounts, such as season-end rate settlements and turnover rebates, failed that test, so suppliers issued credit notes without GST. Those two conditions are now gone. You can issue a GST credit note under Section 34 for a post-sale discount, provided the buyer reverses the matching ITC. The usual deadline for declaring a credit note still applies: 30 November after the end of the financial year, or the date you file the annual return, whichever is earlier. Our guide to rate difference credit notes walks through how to raise and report one.
Inverted duty refunds. Section 54(6) used to allow a 90% provisional refund only for zero-rated supplies such as exports. From 1 November 2026 it also covers refunds of accumulated ITC under an inverted duty structure, subject to the department’s risk checks. If your output is at 5% and a large share of your inputs sits at 18%, refund money should now come back faster. Confirm with your CA that your product is not one of the goods for which inverted duty refunds are barred.
How should job work be handled for dyeing, printing and embroidery?
Most Surat traders never run a machine. Grey fabric goes from the weaver to a process house for dyeing or printing, then perhaps to an embroidery unit, then back to the trader’s godown. Under Section 143 of the CGST Act you can send these goods without paying GST, as long as you follow the job work route:
Send the goods on a delivery challan, not a tax invoice. The challan should show the description, HSN, quantity, value and the job worker’s details. Our note on the delivery challan under Rule 55 covers the format.
Generate an e-way bill where needed. For inter-state movement to a job worker, the e-way bill is required whatever the value of the consignment. Within the state, the normal e-way bill rules apply.
Get the goods back on time. Inputs must return within one year and capital goods within three years. If they do not, the goods are treated as supplied on the day you sent them, and GST is due with interest.
Record the process loss. Shrinkage in dyeing and cutting waste in embroidery are normal. Note the loss on the return challan and in your stock records so your godown stock and the job worker’s account both reconcile.
File ITC-04. If your annual turnover is above ₹5 crore, file it half-yearly, by 25 October for April to September and by 25 April for October to March. Up to ₹5 crore, file it once a year by 25 April.
The process house charges 5% GST on its job charges, and you claim that as ITC like any other purchase.
Worked example: what does a 10,000-metre dyeing lot cost in GST?
Say you run a dress-material trading firm in Surat (an example business). In November you buy 10,000 metres of grey polyester fabric from a weaver in Sachin GIDC and send the whole lot to a process house in Pandesara for dyeing.
Step | Working | Amount |
|---|---|---|
Grey fabric purchase | 10,000 m × ₹60 | ₹6,00,000 |
GST on purchase at 5% | ₹6,00,000 × 5% | ₹30,000 |
Dyeing charges | 10,000 m × ₹14 | ₹1,40,000 |
GST on job work at 5% | ₹1,40,000 × 5% | ₹7,000 |
Finished fabric received | 10,000 m less 4% shrinkage | 9,600 m |
Sale of finished fabric | 9,600 m × ₹95 | ₹9,12,000 |
GST on sale at 5% | ₹9,12,000 × 5% | ₹45,600 |
Your GST payable in cash for this lot is ₹45,600 of output tax less ₹37,000 of ITC (₹30,000 plus ₹7,000), which is ₹8,600.
Your cost per finished metre is ₹7,40,000 divided by 9,600 metres, or about ₹77.08. Price on the metres you actually get back, not the 10,000 you sent. Traders who quote on grey metreage lose the shrinkage margin on every lot without noticing.
If the process house were in Bhiwandi instead of Surat, the movement would be inter-state, and the e-way bill would be compulsory even for a small sample lot.
Which GST mistakes do Surat textile traders make most often?
Using one rate for all garments. Price-based rates mean the per-piece value has to be checked on every invoice line.
Weak HSN codes on fabric. Businesses with turnover above ₹5 crore must show 6-digit HSN, and a code that does not match the fabric invites a rate dispute.
Claiming ITC on bills that are not in GSTR-2B because the weaver filed late.
Forgetting the 180-day payment rule on long-credit purchases.
Sending goods to an embroidery unit without a challan, or leaving them there for more than a year.
Issuing GST credit notes for post-sale discounts without confirming that the buyer will reverse the ITC.
Where hisabkitab fits in
hisabkitab prints HSN codes on every invoice line, so you can keep separate items for garments above and below ₹2,500 and the bill carries the rate for the price band you set. E-way bills come from the same invoice, and GSTR-1 and GSTR-3B are filed from the books you already keep.
On the purchase side, GSTR-2B AI reconciliation shows which weaver and process-house bills are missing from your 2B before you claim them, and it flags wrong GSTINs and duplicate invoices. Outstanding ageing reports help you watch the 180-day rule, and WhatsApp payment reminders help on the receivable side of the same credit cycle. See how it is set up for wholesale businesses.
Frequently asked questions
What is the GST rate on fabric in 2026?
Most fabrics, including grey and finished polyester fabric, are taxed at 5%. Check the HSN entry for specialised fabrics before you bill.
Is GST on clothes 5% or 18%?
Both, depending on price. Garments and made-ups with a sale value up to ₹2,500 per piece attract 5%, and those above ₹2,500 per piece attract 18%.
What is the GST rate on textile job work?
Job work on textiles and textile products, such as dyeing, printing and embroidery on goods you own, is taxed at 5%.
Do I need an e-way bill to send fabric for dyeing?
For inter-state movement to a job worker, yes, whatever the value. Within the state the normal e-way bill rules apply, and a delivery challan is needed either way.
Can I give a discount after the sale and reduce GST?
From 1 November 2026, yes. Issue a GST credit note under Section 34 and make sure the buyer reverses the matching ITC. The discount no longer has to be agreed before the sale.
When is ITC-04 due?
Half-yearly by 25 October and 25 April if your turnover is above ₹5 crore, and once a year by 25 April otherwise.
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