No GST registration required for raw jute, silk suppliers as it invite nil tax

The Indian Central Board of Excise and Customs (CBEC) gave clarifications on its website regarding the Goods and Services Tax (GST). The clarification was in response to complaints of mills asking raw silk and jute suppliers to mandatorily register themselves. Under the current GST regime, raw jute and silk suppliers do not need to register as both raw materials invite nil tax.

The Board further clarified that mills procuring raw jute and silk from unregistered suppliers are not required to pay tax under the Reverse Charge Mechanism (RCM).

A cotton farmer is also not required to register under GST. But buyers of raw cotton from the farmers are required to pay tax on Reverse Charge basis. Jute handbags and shopping bags would be taxed at 18 per cent under the GST, which came into effect on July 1.

On shawls, which have not been classified separately in the GST rate schedule, the CBEC said that as fabric is the cloth made out of yarn by weaving or knitting in running length and packed in rolls, shawls can be classified as fabric. However, if shawls are stitched to form poncho cape shawl wrap, these may be classified as made-up, which are fabrics further worked upon but not stitched into usable garments.

Therefore, when sold directly by cutting from the roll, shawls should be taxed at the rate of 5 percent and when sold as single units or ponchos, these may be taxed as made-ups.

As per the rate schedule, all goods of sale value not exceeding Rs.1000 per piece would be taxed at 5 percent and those exceeding Rs.1000 would be taxed at 12 percent. It is the same value or the transaction value on which the tax has to be paid and not on MRP.

The sarees whether embroidered or not would be taxed at the same rate at which the fabric is taxed. Also, the rate of tax on the dress materials or patterns is similar to the apparels, meaning the sale value not exceeding Rs.1000 will be taxed at 5 percent whereas apparels exceeding Rs.1000 will be taxed at 12 percent.

No Harmonised System of Nomenclature (HSN) code is required to be mentioned up to Rs. 1.5 crore turnover. For those having turnover of Rs. 1.5 to 5 crore, first 2 digits or the chapter number of the HSN code, is required. Only those who have the turnover above Rs. 5 crore are required to mention 4 digits of the HSN code.