If you run a garment shop, a footwear store or a saree showroom, one number now decides your tax on every piece: ₹2,500. Since 22 September 2025, GST on clothes and footwear is 5% when the sale value of a piece or pair is up to ₹2,500, and 18% when it is above. It sounds simple, but discounts, tax-inclusive price tags and bills with many pieces cause real confusion at the counter. This guide works through each case with numbers.
GST on Clothes and Footwear: The Rates
| Product | Sale value per piece / pair | GST now | Before 22 Sept 2025 |
|---|---|---|---|
| Readymade garments (chapters 61, 62) | Up to ₹2,500 | 5% | 5% up to ₹1,000, 12% above |
| Readymade garments | Above ₹2,500 | 18% | 12% |
| Footwear (6401–6405) | Up to ₹2,500 | 5% | 12% up to ₹1,000, 18% above |
| Footwear | Above ₹2,500 | 18% | 18% |
| Blankets, bed linen, curtains (6301–6304) | Up to ₹2,500 / above | 5% / 18% | 5% / 12% |
| Footwear parts, insoles (6406) | Any | 18% | 18% |
So most everyday clothing and footwear got cheaper, while premium pieces above ₹2,500 became costlier: 18% instead of 12% for garments.
How the ₹2,500 Test Works
The test is on the sale value of each piece, which means the transaction value before GST, after any discount given on the bill. It is not the bill total and not the MRP.
Example 1: Discount brings a piece into 5%
A shirt is priced at ₹3,000 before tax. At the counter you give ₹500 off. The sale value is ₹2,500, so GST is 5%: ₹125, and the customer pays ₹2,625. If the discount were ₹499, the value would be ₹2,501 and the whole piece would be taxed at 18%.
Example 2: Tax-inclusive price tags
Most shops print a price that already includes GST. Divide it back to find the sale value:
- Tag ₹2,625: at 5% the sale value is ₹2,625 ÷ 1.05 = ₹2,500. That is within the limit, so 5% applies (₹125 GST).
- Tag ₹2,999: at 18% the sale value is ₹2,999 ÷ 1.18 = ₹2,541.53. That is above ₹2,500, so 18% applies (₹457.47 GST).
A tax-inclusive tag between about ₹2,626 and ₹2,950 does not fit cleanly. At 5% the value works out above ₹2,500, but at 18% it works out below. There is no clean answer, so either avoid tags in this band, for example ₹2,599 or ₹2,999, or take your CA's view and apply it consistently.
Example 3: Mixed bill
A customer buys a kurta at ₹1,800 and a blazer at ₹3,200, both before tax. The bill total is ₹5,000, but the rate is decided per piece: the kurta at 5% (₹90) and the blazer at 18% (₹576). Total GST is ₹666 and the bill comes to ₹5,666. Charging 18% on the whole bill because the total crossed ₹2,500 is a common and costly mistake.
Sarees, Fabric and Dress Material
Unstitched fabric, including most sarees and dress materials sold by the metre or piece, is classified as fabric rather than as a garment. Fabric was not part of the ₹2,500 price rule. If you sell both fabric and stitched garments, make sure each item carries its own HSN code and rate. Embroidered or specially made items can fall under different headings, so confirm unusual items with your CA.
Exchanges and Returns
Exchanges are routine in clothing. When a customer returns a ₹2,800 jacket and takes a ₹2,200 one, treat it as a return of the first piece (a credit note at the rate it was billed) and a sale of the second at its own rate. Do not just bill the ₹600 difference. Our guide to credit notes and sales returns explains the paperwork.
Setting This Up in Billing Software
The rule only works if every item carries the right rate for its price. In Billux for clothing stores:
- When you enter an HSN code from chapter 61, 62 or 64 with the price, the item form suggests 5% or 18% from the price. In the grey zone above, it leaves the choice to you rather than guessing.
- Size and colour variants keep their own price and stock. The GST rate is set on the item, so if one size of a design crosses ₹2,500 while the others stay under, set that size up as its own item at 18%.
- The clothing counter handles exchanges in one step, with the return and the new sale on record.
- Barcode labels print with the price, so the counter never retypes a price.
Plans start at ₹2,500 a year with a 7-day free trial (see pricing). For more on choosing software for a garment shop, read our clothing store billing software guide, and check the full new GST rates list for everything else you stock. Shops in textile hubs can also see our page for billing software in Surat.
Two Rates on One Bill and in GSTR-1
Because the rate follows the price, the same HSN code can appear on your bills at both 5% and 18%. That is expected. Your printed bill should show a tax summary by rate, and in GSTR-1 the HSN summary is reported rate-wise, so one shirt code can have a 5% line and an 18% line. Do not force everything into one rate to make the return look tidy.
Pricing tips under the new rule
- Mind the edge: a tax-inclusive tag of ₹2,599 stays in 5%, with a taxable value of ₹2,475.24 and GST of ₹123.76.
- Check sale-season discounts: a 20% discount can pull a ₹3,100 piece (before tax) down to ₹2,480 and into 5%. Your software should work out the rate on the discounted value.
- Re-check old stock: garments priced between ₹1,000 and ₹2,500 moved from 12% to 5% on 22 September 2025, and footwear in that band from 18% to 5%, so make sure their rate was updated.
The Bottom Line
Per piece, before GST, after discount: that is the whole rule. Up to ₹2,500 is 5%, above it is 18%. Price your tags with the grey zone in mind, rate each piece on its own, and let your billing software apply the rate so the counter does not have to think about it.
Frequently Asked Questions
What is the GST rate on clothes above ₹2,500?
From 22 September 2025, readymade garments with a sale value above ₹2,500 per piece attract 18% GST. Pieces up to ₹2,500 attract 5%.
What is the GST on footwear?
Footwear with a sale value up to ₹2,500 per pair is 5% GST, and above ₹2,500 per pair is 18%. Footwear parts and insoles are 18%.
Is the ₹2,500 limit on the bill total or per piece?
Per piece or per pair. Each item on the bill is tested on its own sale value before GST, so one bill can carry both 5% and 18% items.
Does a discount change the GST rate on clothes?
Yes. The test uses the sale value after a discount given on the bill. A ₹3,000 shirt sold with ₹500 off has a value of ₹2,500 and is taxed at 5%.
What was the GST on clothes before September 2025?
Before 22 September 2025, garments were 5% up to ₹1,000 per piece and 12% above. Footwear was 12% up to ₹1,000 per pair and 18% above.
