GST on Clothes and Footwear: The ₹2,500 Rule

The test is on the sale value of each piece, which is the price actually charged before GST. A discount shown on the invoice reduces the value and can move a piece from 18% to 5%. A kurta tagged ₹2,800 sold with a 15% discount has a value of ₹2,380, so it is taxed at 5%.

Prices printed inclusive of tax near ₹2,500 are where confusion starts, because the rate changes the value. The safest course is to decide the rate on the price before GST and print tags that way, and to take advice if you price close to the line.

A garment shop in Mysuru; within Karnataka each GST amount is split equally into CGST and SGST. The bill rounds to ₹8,920.

• Applying one rate to the whole bill instead of testing each piece
• Testing the MRP instead of the discounted price shown on the invoice
• Giving a discount after billing (a credit note) and expecting the rate to change
• Keeping the old ₹1,000 threshold in the billing software
• Treating a pair of shoes as two pieces, or a set as one without checking

Fabrics and most garments bought for resale are at 5%, so credit flows normally. Where inputs are taxed at 18% and the output at 5%, credit can build up in the ledger. Refund of accumulated credit on an inverted duty structure has its own rules and limits; ask a chartered accountant before counting on it.

GSTR-1 reports the same HSN at two rates as two lines in the HSN summary, one at 5% and one at 18%. B2C totals are reported by rate, so the split must be right on every bill.

Many shops print tags inclusive of tax. If you do, check what the price before tax works out to for each tag close to ₹2,500, because that figure decides the rate. A tag of ₹2,520 at 5% is ₹2,400 before tax and stays at 5%; a tag of ₹2,950 is ₹2,500 before tax only if worked at 18%, which is exactly the confusing case to avoid. Printing round prices before tax, or taking advice for tags near the line, keeps the counter simple.

A garment returned for a different size is a credit note for the original and a new invoice for the replacement, each at the rate for its own value. A return of something bought before 22 September 2025 is reversed at the rate on the original bill. If a discount is given later, through a credit note, it does not change the rate charged on the original invoice.

TripleBill's garment mode (Pro) sells articles in sizes and colours with stock and price per size × colour. Set the 5% or 18% rate on each variant according to its price, and the bill applies it line by line.

This page is general information about GST in India, not tax advice. Rates, thresholds and rules change; confirm with the GST portal or a chartered accountant before acting.

Last reviewed: November 2026. Facts on this page were checked against:

• Notification No. 9/2025-Central Tax (Rate), 17 September 2025 (chapters 61, 62 and 64)
• Statement of the Ministry of Finance in the Lok Sabha on the garment rate change
• CGST Act, 2017, section 15(3) (discounts in value of supply)