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
| Sale value per piece | GST rate (2026) | Old rate (pre-22 Sep 2025) |
|---|---|---|
| Up to ₹2,500 | 5% | 5% (only up to ₹1,000) |
| Above ₹2,500 | 18% | 12% (above ₹1,000) |
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 count: if a ₹3,000 coat is sold at ₹2,400 after markdown, it drops to the 5% slab because the sale value is what matters.
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, sarees stitched as garments, jackets).
Your billing software should map each product to the right HSN and then auto-apply the slab based on the piece's sale price. 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 slab switch on every variant
A single shirt design is not one product. Eight sizes multiplied by ten colours is 80 separate SKUs — and a mid-size store can carry thousands of live variants at once. Each variant needs its own barcode, its own stock count, and now its own GST slab depending on where its price lands against the ₹2,500 line. Track that by hand and mistakes are guaranteed.
This is where a proper barcode inventory system earns its keep. A variant matrix lets you create one product master — say "Cotton Kurta" — and auto-generate every size-colour combination, each with a unique barcode and independent stock. Good software then switches the GST slab automatically at ₹2,500 so the biller never has to decide 5% vs 18% at the counter.
How to bill a clothing store correctly in 2026: 5 checks
- Auto slab-switching at ₹2,500. The software must apply 5% at or below ₹2,500 and 18% above, per piece, on the discounted sale price — not a flat store-wide rate.
- 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.
- Correct HSN mapping. Knitted (Ch 61) vs woven (Ch 62) must be tagged per product and printed on the invoice alongside the rate.
- 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.
- 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.
Frequently asked questions
What is the GST rate on readymade garments in India in 2026?
Readymade garments are taxed at 5% GST if the sale price is up to ₹2,500 per piece and 18% if it exceeds ₹2,500 per piece. This applies from 22 September 2025 and covers both knitted (HSN Chapter 61) and woven (Chapter 62) apparel.
Is the ₹2,500 GST threshold based on MRP or selling price?
It is based on the actual sale value per piece, not the MRP. If a garment is discounted below ₹2,500, it qualifies for the 5% slab even if its MRP is higher. The check is done on each individual piece, not the total bill amount.
What was the old GST rate on clothes before 2026?
Earlier, garments were taxed at 5% up to ₹1,000 per piece and 12% above ₹1,000. The 2026 structure raised the lower-slab threshold to ₹2,500 and changed the higher rate from 12% to 18%.
How do clothing shops handle GST across so many size and colour variants?
Billing software uses a variant matrix: one product master generates every size-colour SKU with its own barcode and stock, and the system auto-applies the correct 5% or 18% slab based on each piece's sale price — so staff never calculate the rate manually at the counter.
Bottom line
The new ₹2,500 threshold pushes most everyday clothing into the cheaper 5% slab, but premium pieces now carry 18% — and the only safe way to bill across hundreds of size-colour variants is software that switches the slab automatically and tracks every SKU by barcode. See how RichPOS handles clothing-store billing, size-colour variants and automatic GST slabs so your counter stays fast and your invoices stay compliant.
Sources: GST Council rate rationalisation effective 22 September 2025; CBIC HSN Chapters 61 & 62; 2026 India garment-GST and apparel-POS guides. Rates are indicative — confirm current notifications before filing.
