Clearing the air over whether sarees will be treated as garments or fabric, the Central Board of Excise and Customs (CBEC) said that sarees are treated as fabric and it remains so even after embroidery etc. as no new item emerges having a distinct name, character and use. Hence, all designer, embroidered sarees or otherwise value added will attract a 5 per cent goods and services tax. Infact, sarees, embroidered or not, would be taxed at the same rate at which the fabric is taxed, the CBEC explained.

It said 5 per cent GST is levied on job processes relating to the textile yarn (other than manmade fibre/filament) and fabrics. With regard to dress materials, if sale value is not exceeding Rs. 1,000, then a 5 per cent GST will be levied and in cases where it exceeds Rs. 1,000, a 12 per cent GST will be charged.

According to set Goods and Services Tax Council rates, all categories of fabric attract a 5 per cent rate. Manmade apparel up to Rs. 1,000 will attract 5 per cent tax and those above Rs. 1,000, will attract 12 per cent. The CBEC, in connect to sale of old dhotis said that it would be treated as “worn clothing” and will be taxed as apparel based on sale value. As presumably the old cotton dhoti would be below the sale value of Rs. 1,000 per piece, it would be taxed at 5 per cent. With regard to new dhotis, tax rate will be 5 per cent.