This circular provides clarification on the classification and GST rate applicable to cut pieces of fabrics, including unstitched salwar suits, where fabric is sold in cut lengths prior to stitching.

It clarifies that fabrics are classifiable under Chapters 50 to 55 of the Customs Tariff, based on their constituent materials, and are subject to a uniform GST rate of 5%, with no refund of unutilized input tax credit. Doubts had arisen on whether cutting fabric from thans or bundles into pieces of varying lengths changes its classification.

The circular clarifies that mere cutting and packing of fabric into pieces of different lengths, without any further processing such as stitching or tailoring, does not alter the essential character of the fabric. Accordingly, such cut pieces or unstitched fabric sets continue to be classified as fabrics under the relevant tariff heading and remain taxable at 5% GST.

This clarification ensures uniform tax treatment of unstitched fabric pieces and removes ambiguity regarding their classification under GST.