In a recent ruling by the Authority for Advance Ruling (AAR) in Tamil Nadu, the classification and applicable Goods and Services Tax (GST) rate for men's cotton pyjama sets were determined. The case involved M/s Link Up Textiles Pvt. Ltd., which manufactures pyjama sets consisting of a woven shirt and trousers made from a blend of cotton, polyester, and spandex. These sets are sold in pairs, each priced over ₹1,000, prompting the company to seek clarification on their classification under the Harmonized System of Nomenclature (HSN) and the relevant GST rate.
The central issue was whether these pyjama sets should be classified under HSN 620721, which pertains to men's or boys' nightshirts and pyjamas made of cotton, and how the GST rate would apply based on the value per set.
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The AAR concluded that the garments, being primarily cotton blends, fall under HSN 620721. According to the Notification No. 1/2017–CT (Rate) dated June 28, 2017, the GST rate is contingent on the retail sale price (RSP) of the sets. If the RSP is below ₹1,000 per set, a 5% GST rate applies, composed of 2.5% Central GST (CGST) and 2.5% State GST (SGST). For sets priced at ₹1,000 or more, the GST rate increases to 12%, with 6% CGST and 6% SGST.
This ruling emphasizes that the classification and GST rate are determined by the transactional value of each set at the time of supply, impacting the tax obligations for manufacturers and retailers of such apparel.
Order Date: 18 February 2025
Case Title: M/s Link Up Textiles Pvt. Ltd. v. Authority for Advance Ruling, Tamil Nadu
Facts
- The applicant, M/s Link Up Textiles Pvt. Ltd., manufactures men’s pyjama sets comprising a woven shirt (top) and woven trousers (bottom) made of 67% cotton, 29% polyester, and 4% spandex.
- The sets are packed in units of two, each priced at more than ₹1,000. The applicant sought a ruling on the HSN classification and applicable GST rate for these pyjama sets.
Issue
- Whether men’s cotton pyjama sets should be classified under HSN 620721 and the applicable GST rate when the value per set exceeds or falls below ₹1,000?
Order
- The Authority observed that both top and bottom garments were woven apparel made primarily of cotton blends and hence classifiable under HSN 620721 (Men’s or boys’ nightshirts and pyjamas of cotton).
- Under Notification No. 1/2017–CT (Rate) dated 28.06.2017: When the retail sale price (RSP) is below ₹1,000 per set, GST rate is 5% (2.5% CGST + 2.5% SGST) and When RSP is ₹1,000 or more per set, GST rate is 12% (6% CGST + 6% SGST).
- Accordingly, classification and rate depend entirely on the transactional value per set at the time of supply.
