The socio-economic history of India has been greatly influenced by the hand-spun and hand-woven fabric known as khadi. The Indian government has recently implemented many initiatives, like as tax exemptions and incentives, to encourage the expansion of the khadi industry. The Goods and Services Tax (GST) Act is one such tax regulation that contains particular rules for the taxation of khadi items.
Khadi and khadi items are exempt from Tax under the GST Act. All khadi products, including yarn, fabric, and ready-to-wear khadi clothing, are excluded from this rule. As both the central GST and the state GST are exempt, khadi items are totally tax-free.
Yet, it’s crucial to remember that this exception only applies to genuine khadi items. In India, the Khadi and Village Industries Commission (KVIC) is the central organisation in charge of certifying khadi goods. The KVIC certification mark must be present on the goods in order to qualify for the GST exemption. This ensures that only authentic khadi items are exempt from taxes and prohibits dishonest sellers from abusing the privilege.
In addition, khadi items that are not exempt from the exemption have a 5% GST rate. Compared to other textile and apparel products, which are taxed at a higher rate, this is a relatively modest rate. By making khadi products more accessible to customers and encouraging their purchase, this lower tax rate helps the khadi industry expand.
The Khadi and Village Industries Commission, sometimes known as KVIC, is a governmental organisation that was founded in India in 1956 as a result of the Khadi and Village Industries Commission Act.
KVIC is free from paying income tax on its profits and gains under the Income Tax Act of 1961. According to section 10(26BB) of the Income Tax Act, any money earned by KVIC through the sale of khadi or goods produced by village industries is exempt from income tax. This exemption is made possible by this provision.
This exemption is provided to encourage and promote the production and sale of khadi and village industry goods, which are considered as a way to generate income and employment in rural regions and to support environmentally friendly and sustainable enterprises.
| Product | GST Rate | HSN Code |
|---|---|---|
|
Khadi |
62114921 |
5% |
|
Khadi Yarn |
- |
0% |
|
KVIC sells khadi fabric |
- |
0% |
Overall, the GST exemption for khadi goods provides khadi producing facilities with a sizable incentive and aids in the sector’s expansion and development. The exemption, along with the KVIC certification mark, ensures that only authentic khadi products are eligible for the tax exemption, defending consumer interests and fostering the industry’s sustainable growth.
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