India's imitation zari thread or yarn to attract 5% GST: CBIC

03 Nov '23

2 min read

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India's Central Board of Indirect Taxes & Customs has declared that imitation zari thread or yarn will be subjected to a 5 per cent GST, as per recommendations from the GST Council.
This tax rate applies to zari made from metallised polyester or plastic film.
Amendments have been made to ensure no refund on polyester film due to tax inversion.

India's Central Board of Indirect Taxes & Customs (CBIC) has announced that imitation zari thread or yarn, made from metallised polyester film or plastic film, will attract a 5 per cent GST. This decision comes as the product falls under HS 5604, covered by SI No. 218AA of Schedule I, following recommendations from the GST Council in its 50th meeting.

According to a circular issued by the CBIC, the GST Council had suggested a reduction in GST to 5 per cent on imitation zari thread or yarn, leading to the insertion of SI No. 218AA in Schedule I of notification no 1/2017. Subsequent queries arose on whether metal-coated film converted to metallised yarn and twisted with nylon, cotton, polyester, or any other yarn to make imitation zari thread would attract the 5 per cent GST, or if it would fall under SI No 137 of Schedule III, which covers other metallised yarns attracting 12 per cent GST.

In response, the GST Council recommended fixing the GST for imitation zari at 5 per cent in its 52^nd meeting on October 7, 2023, based on the HS explanatory notes. Furthermore, the CBIC clarified that the Council also recommended disallowing refunds on polyester film (metallised)/plastic film due to the inversion of the tax rate. The necessary amendments were made in notification no 5/2017- Central Tax (Rate) through notification no 20/223-Central Tax (Rate) on October 19, 2023.

Fibre2Fashion News Desk (KUL)

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