Clarification regarding GST rate on imitation zari thread or yarn based on the recommendation of the GST Council in its 52ndmeeting held on 7th October, 2023.

Circular No.: 205/17/2023-GST
Date of Circular: 31st October 2023
Relevant Sections and Rules:

• CGST Act, 2017: Section 9 – Levy of tax
• IGST Act, 2017: Section 5 – Levy of integrated tax
• Rate Notifications:
  • Notification No. 1/2017-CT(R) dated 28.06.2017
  • Schedule I, Sl. No. 218AA – 5% GST on imitation zari yarn
  • Notification No. 5/2017-CT(R) amended by Notification No. 20/2023-CT(R) dated 19.10.2023

Summary of Clarification Provided:

GST Rate on Imitation Zari Thread or Yarn:

The GST Council, in its 52nd meeting, clarified that:

• Imitation zari thread or yarn, manufactured using metal-coated plastic film or metallised polyester film twisted with textile material (nylon, cotton, polyester, etc.), falls under HSN 5605.
• These are classified under Sl. No. 218AA of Schedule I of Notification No. 1/2017-CT(R), and hence attract 5% GST.

This clarification resolves doubts about whether such imitation zari yarn should be classified:

• Under Sl. No. 218AA (5%), or
• Under Sl. No. 137 of Schedule II (12%) for metallised yarn.

The Council confirmed that such imitation zari thread made from metallised plastic film qualifies for the 5% rate.

Inverted Duty Structure Refund Not Allowed on Polyester Film Input:

To address inverted duty concerns, the Council further recommended that:

• No refund shall be allowed under inverted duty structure for input tax paid on metallised polyester film or plastic film used in the manufacture of imitation zari thread.
• This restriction is enforced via amendment to Notification No. 5/2017-CT(R) through Notification No. 20/2023-CT(R) dated 19.10.2023.

Source: Circular No.: 205/17/2023-GST