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2019 (5) TMI 1041 - AAR - GSTLevy of GST - Khadi fabric, sold through Khadi and Village Industries Commission (KVIC) and KVIC certified institutions/ outlets - N/N. 02/2017 Central Tax (Rate) dated 28.06.2017 further amended vide Notification No. 28/2017-Central Tax (Rate) dated 22.09.2017 - HELD THAT - Heading 50 to 55 includes only khadi fabrics and not readymade garments of khadi. The readymade garments of khadi does not fall under the entry 130A of Notification No. 02/2017 -Central Tax (Rate) dated 28.06.2017 and hence not exempted. The entry for readymade garments is mentioned at Serial No. 170 (GST @ 5%) and Serial No. 223 (GST @12%) (GST of Schedule-I and Schedule-II respectively of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) subject to price cap.
Issues: Classification of Khadi readymade garments under GST
Issue 1: Admissibility of Advance Ruling The issue raised by M/s. Udyog Mandir, a registered person, regarding the classification of goods falls under the ambit of Section 97(2)(a) for pronouncing an advance ruling. The applicant's status as a registered person and the absence of pending proceedings allow for the admissibility of the advance ruling. Issue 2: Classification of Khadi Readymade Garments The applicant, a manufacturer of Khadi garments, sought clarification on whether Khadi readymade garments fall under the entry of Khadi fabric in the GST classification. The applicant purchases Khadi fabric, stitches it, and manufactures garments. The Authority observed that the exemption under Notification No. 28/2017 applies only to Khadi fabric, not readymade garments. Readymade garments are classified under Chapter heading/tariff item 62, attracting GST rates of 5% for items below ?1000 and 12% for those above ?1000. Issue 3: Personal Hearing A personal hearing was granted to the applicant, where the authorized representative reiterated the submissions made in the application. The applicant requested a prompt decision during the hearing. Issue 4: Comments of the Jurisdictional Officer The jurisdictional officer stated that items other than Khadi yarn and Gandhi Topi are not exempt from GST, supporting the position that readymade Khadi garments do not fall under the exempt category. Issue 5: Findings, Analysis & Conclusion The Authority analyzed the submissions and the relevant notifications to conclude that Khadi readymade garments do not qualify under the exempt category for Khadi fabric. Instead, they are classified under Chapter heading/tariff item 62, attracting GST rates of 5% or 12% based on the sale value. Conclusion: The ruling determined that Khadi readymade garments are not covered under the Khadi fabric entry and should be classified under Chapter heading/tariff item 62. The applicable GST rates are 5% for items below ?1000 and 12% for those exceeding ?1000 in sale value.
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