GST Rate & HSN Code for Man-Made Filaments – Chapter 54 Filament (strip) products are produced from synthetic material such as polyester, nylon & lycra. The Harmonized System Nomenclature (HSN) contains a Class 56 item (manmade filament) in the Harmonised System of Nomenclature Product Type, HSN Classification Number. Every product made with filament material (strip product) has an assigned HSN Classification Number (Chapter 56). When a company produces filament (strip) product(s), they must use the HSN Classification Number to determine what GST tax rates they will charge in each state and also to ensure compliance with Indian law regarding invoicing and GST filing. What Are Man-Made Filaments Man-made filaments are fibers produced by man either through chemical means or industrial production methods. To produce long uniform strands of continuous filament, a solution or molten polymer is forced through a device called a spinneret. Man-made filaments are generally classified into two main types:
Synthetic "natural" fibers from petrochemical sources, such as polyester, nylon, and acrylic; and
Artificial "natural" fibers based on forms of natural polymers — a common form being viscose rayon.
The advantages of man-made filaments include;
They are strong, durable, consistent and have resistance to wrinkling, moisture and chemical attack.
The ability to engineer man-made filament gives it versatility by providing options that allow for the ability to tailor specific attributes, such as elasticity, lustre, thermal resistance or ability to absorb moisture.
Man-made filaments are extensively used to produce yarns, knit and woven fabrics, sewing threads, seatbelts, tire cords, geotextiles, athletic apparel, household textiles, industrial textiles and technical textiles.
Refer this: GST Rates & HSN Code for Artificial Filament Tow (5502)
Breakdown of Important Headings 5401 – Sewing Thread of Man-Made Filaments These contain all sewing threads produced from synthetic or man-made filaments. It does not matter if the thread is packed for retail sales. Synthetic or artificial sewing threads are widely used on garments, furniture, shoes, bags and in a variety of operations for industry due to their exceptional strength and durability. The majority of products pertaining to heading 5401 will incur a 12% GST, which is considerably less than the tax rate applied to the finished goods of woven textiles.
5402 – Synthetic Filament Yarn There are several types of synthetic filament yarns available to manufacturers today, including polyester, nylon, polypropylene, etc., consisting of continuous fibers produced from synthetic ingredients (man-made materials). Synthetic fibers are generally used to create woven knit embroidery and many other textiles for commercial or industrial purposes (including uniforms etc.).
Most of the synthetic filament yarns under this heading would be subject to the 12% GST rate; however, some products which are not typical filament yarns under this classification would be subject to an 18% GST. Therefore, the proper selection of an HSN code is critical as it impacts the GST rate that may be applied.
Refer here: GST Rates and HSN Code 5402 for Synthetic Filament Yarn
5407 & 5408 – Woven Fabrics These include woven fabrics produced from synthetic or man-made filament yarns. Woven fabrics are typically used in apparel such as dresses, sarees/saris, suitings, linings, and household textiles such as curtains and upholstery, and some technical or industrial fabrics. The vast majority of woven fabrics that fall under either heading would attract a GST of 5% which creates a favourable cost to consumers and a wider acceptance of their use in the textile industry.
GST Impact on Textile Manufacturers and Traders Production Costs The GST on synthetic filament impacts input costs associated with yarns and fabrics produced, as rate increases for 12%–18% will add a significant cost to the manufacturing process.
Pricing Textiles & Garment Goods Increased GST paid on raw material increases the price of the finished textile to customers, ultimately limiting both retail margins and customer demand.
Availability of ITC Both manufacturers and traders are eligible to claim back the GST paid on their filament yarns, creating an ITC that reduces the cascading effects of taxes and provides better cash flow.
Change from Cotton to Synthetic Variation in the GST rate between types of fibres will encourage or discourage a shift from natural fibres to synthetics.
Compliance and Documentation Using the correct HSN code under Chapter 54 when filing returns is necessary to avoid penalties, audits and notices from the department regarding misclassification.
Impact on MSMEs Small textile manufacturers may face a higher level of compliance burden than larger mills when filing e-invoices and interpreting applicable rates.
Key HSN Codes in Chapter 54 & GST Rates HSN Code Description GST Rate (India) 5401 Sewing thread of man-made filaments, retail or non-retail 12% 5402 Synthetic filament yarn (excluding sewing thread) 12%/18% 5403 Artificial filament yarn (excluding sewing thread) 12%/18% 5404 Synthetic monofilament & strip materials 12%/18% 5405 Artificial monofilament & strip materials 12%/18% 5406 Filament yarn retail packs 12%/18% 5407 Woven fabrics of synthetic filament yarn 5% 5408 Woven fabrics of synthetic filament yarn 5%
Note: For some sub-categories in 5402 – 5406, the rate of GST between synthetic/filament Yarn is normally 12% whereas other items in these categories can attract 18%, depending on the technical specifications of the product.
Tips for Businesses Please make sure that the correct HSN code is used on all invoices so that the correct input tax credit can be claimed.
For EPA -exported goods, the IGST rate may vary by country, such as if the goods are being exported under Special Provisions.
GST rates should be reconciled with the official government GST notifications, as many products have two GST rates.
Ensure that adequate documentation is kept for all purchases (Purchase Invoices), as well as documenting the classification of products, in order to successfully navigate through GST audits.
Periodically review the classification of the products that you deal with due to the possibility of changes to existing GST rates and notifications.
Make sure all accounting and billing employees have been trained on the use of the HSN codes as well as changes in GST so that they do not result in errors or the need to send notices to clients.
Seek professional help if you are uncertain regarding the classification of certain goods, especially in borderline cases regarding yarn, thread, and fabric.
Conclusion The backbone of many textile and engineering industries is Chapter 54, Synthetic Fiber (HTSUS Number 'SYNTHETIC' or 'TEXTILES'). The correct GST Rate applied as well as its associated HSN Code are crucial for the invoice at which they were issued, claiming an ITC, pricing applications and claiming Export Benefits. There is a difference between the HSN codes for all threads and yarns versus some woven fabrics. Companies need to ensure they classify correctly by always being aware of new notification updates, so they do not receive a GST penalty or end up having disputes with a customer or against competitive pricing.
Suggested Read: Monofilament GST Rates & HSN Code – What You Should Know
FAQs Why are HSN codes assigned to the products listed in Chapter 54? HSN codes are used for classifying all products made with artificial filaments according to a standardized method for the purpose of implementing the GST on a universal basis across all industries.
Does GST apply to synthetic filament yarns? Generally, synthetic filament yarns referred to by the HSN number 5402 have a GST rate of 12%, however there can be exceptions of up to 18% for particular filaments.
Woven fabrics made from the aforementioned types of filament yarns will attract what rate of GST? Woven fabrics manufactured from synthetic or man-made filament yarns generally have a GST rate of 5%.
Are the rates of GST applicable to the aforementioned products when they are exported? Exports of goods will be zero-rated under the Integrated Goods and Services Tax with appropriate documentation, but the domestic GST rates will continue to apply in relation to the respective definitions pertaining to those goods. (Refer to the latest CBIC Circulars.)
Where can I look to determine whether my goods fall within the 12% or 18% GST rate categories? Your first step is to locate the precise subheading within Chapter 54 along with a product description. If your products fit into the categories of filament yarns defined in this chapter, they typically will be subject to the 12% GST rate; if they do not fall into one of these categories, they may be subject to the higher 18% GST rate.
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