GST on Clothes in India 2026: New 5% & 18% Rules

From 22 September 2025, readymade garments in India are taxed at 5% GST if the sale price is up to ₹2,500 per piece, and 18% if it crosses ₹2,500 per piece. This replaced the old rule of 5% below ₹1,000 and 12% above. The threshold reads on the actual sale value, not the MRP — so a ₹3,000 shirt discounted to ₹2,400 is billed at 5%.

If you run a clothing, garment or fashion store, this one change rewrites how you price, tag and bill almost every item on your racks. Get the slab wrong on a single high-value piece and you either overcharge the customer or absorb the tax yourself. Here is the full 2026 picture — the new rates, the HSN codes, and how to keep billing correct across hundreds of size-and-colour variants.

GST on clothes in India 2026: the new rates

Two things changed at once: the lower-slab threshold jumped from ₹1,000 to ₹2,500 per piece, and the higher slab moved from 12% to 18%. For most everyday clothing — shirts, kurtas, jeans, kidswear — that means more of your catalogue now falls inside the cheaper 5% slab. But premium and occasion wear above ₹2,500 now carries a steeper 18%.

It is per piece, on sale value — not the bill total

The ₹2,500 line is checked on each individual garment's selling price, not the invoice total and not the MRP. Sell three ₹900 t-shirts on one bill and every piece is 5%, even though the bill is ₹2,700. Sell one jacket at ₹2,800 and that single piece is 18%. Discounts shown on the bill generally count: if a ₹3,000 coat is sold at ₹2,400 after markdown, it falls in the 5% slab because the sale value is what matters. Confirm discount cases with your CA.

HSN codes: Chapter 61 vs Chapter 62

Readymade garments sit in two HSN chapters, and both now follow the same 5% / 18% split:

• Chapter 61 — knitted or crocheted apparel (t-shirts, jersey wear, knitted tops).
• Chapter 62 — woven apparel (shirts, trousers, jackets).

Your billing software should store the right HSN and GST rate on each product or variant. Printing the correct HSN and GST rate on every line is mandatory — see our guide to the GST invoice format for retail shops and the wider 2026 GST rate changes for retailers.

The real headache: the ₹2,500 line on every variant

Each size and colour of a design is its own SKU with its own barcode, stock and, if prices differ, its own GST rate. Set the rate on each variant once (5% if it sells at or below ₹2,500, 18% above), and review it whenever you mark down a premium piece below ₹2,500; see managing size and colour variants and inventory with variants and barcode labels.

How to bill a clothing store correctly in 2026: 5 checks

1. Correct rate per item or variant, reviewed after markdowns. 5% at or below ₹2,500 and 18% above, per piece, on the sale price — not a flat store-wide rate.
2. Variant matrix with per-SKU barcodes. Size × colour combinations should generate automatically, each with its own barcode and stock, so counting and reorders stay accurate.
3. Correct HSN mapping. Knitted (Ch 61) vs woven (Ch 62) must be tagged per product and printed on the invoice alongside the rate.
4. Returns and exchanges. Apparel returns are constant — the tool must reverse the exact slab charged and restore the right variant to stock. Use a billing software checklist before you buy.
5. Fast checkout and UPI. Festive rushes punish slow counters. Barcode scanning plus built-in UPI payment acceptance keeps queues moving. Pair it with solid retail inventory management so you never oversell a hot size.

Choosing software for a garment counter? Compare the options in our guide to the best billing software for clothing shops.

Related guides: How to Start a Clothing Shop Business in India (2026).

Bottom line

The new ₹2,500 threshold pushes most everyday clothing into the cheaper 5% slab, but premium pieces now carry 18% — so set the right rate on every size-colour variant, review it after markdowns, and track every SKU by barcode. See billing software for clothing shops: size and colour variants, barcode labels and GST bills.

Sources: GST Council / PIB, Recommendations of the 56th GST Council meeting, 3 September 2025 (Annexure: apparel up to ₹2,500 per piece no change at 5%; above ₹2,500 12% to 18%); Notification 9/2025-Central Tax (Rate), 17 September 2025, effective 22 September 2025. Rates checked 15 October 2026 — confirm current notifications before filing.