By Neelanjit Das

Copyright indiatimes

Starting September 22, 2025, clothing and apparels priced between Rs 1,000 and Rs 2,500 will see a reduced goods and services tax (GST) rate. Before this change, the GST on clothing was 5% for items valued at Rs 1,000 or less and 12% for those over Rs 1,000.Income Tax GuideIncome Tax Slabs FY 2025-26Income Tax Calculator 2025New Income Tax Bill 2025Check out the full story to learn more about how these new GST rates will impact discounts.How does this work?Ankit Joshi, Partner, N A Shah Associates LLP, says: “With effect from September 22, 2025, apparel valued above Rs 2,500 will attract GST at 18%, while apparel priced up to Rs 2,500 will be taxed at 5%. This will lead to a benefit of 7% for some of the consumers and an increase of 6% for some consumers.”Earlier the GST rate was 12% for apparels of value more than Rs 1,000. From September 22, 2025 the GST rate will be 5% for apparels costing up to Rs 2,500 thereby saving 7% (12-5) GST. So apparels costing more than Rs 2,500 will now attract 6% (18-12) more GST.Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys, says there is a reduction in applicable GST rate for apparels with sale value of Rs 1,000 to Rs 2,500.Will a 20% discount on readymade shirt priced Rs 3000 save 13% more on GST?What will the GST rate be if a readymade shirt priced Rs 3,000 has a discount of Rs 599. Mehta explains that if the sale price of a shirt is Rs 3,000 but after applying a discount of Rs 599, the amount payable is Rs 2401, since the transaction value is less than Rs 2,500, it will attract a 5% GST.Joshi explains that this happens because GST is charged on the final transaction value shown on the invoice. Mehta says that for any garment of sale value of Rs 2,500 or below before GST (i.e., the transaction value), the applicable GST rate of GST is 5%.Examples:Clothes priced up to Rs 2,500 will attract 5% GST. Hence if a shirt costs Rs 2,000, a GST of Rs 100 ( @5% GST) will be added, making the total Rs 2,100. Even if the price is exactly Rs 2,500, GST @ 5% applies, and so the total becomes Rs 2,625. So, all items at or below Rs 2,500 remain in the tax bracket of 5%.In the case of a shirt of sale value of Rs 2,600 (with a discount of Rs. 300), the net sale price at Rs 2,300 falls in the category of apparels with sale value not exceeding Rs 2,500 and the applicable rate of GST will be 5%. Now, 5% of Rs 2,300 is Rs 115. The customer will pay Rs 2,415 for the shirt.Also read: EPS 95 Pension: Madras HC allows higher EPS pension for post-Sept 1, 2014 retirees under this conditionHow will the GST rate work in case of credit card specific discountMehta says that in case of credit card discounts, generally the discount given to customers is jointly borne by the bank and the supplier of garments in a pre-agreed ratio. In such cases, the proportionate value of agreed ratio to be borne by the bank is reimbursed by the bank to the supplier of garments. Therefore, it should be added in the sale value i.e., the taxable value of apparel, for the purposes of levy of GST.Let’s take an example where a shirt is costing Rs 3,000 but the e-commerce portal is giving special credit card discount and not normal discount. That means those who don’t have this credit card will buy it at Rs 3,000 but those who have this credit card will buy it for Rs 2000.Also read: Grandmother gave him Rs 10 lakh and created gift deed but income tax dept issued him notice; grandson partly wins case in ITAT Pune due to this reason Joshi explains how GST will work in this case: If a shirt is priced at Rs 3,000, it will fall under the 18% GST bracket since the value exceeds Rs 2,500. However, if the e-commerce portal provides a special credit card discount and this discount is clearly reflected in the invoice itself ,for example, the final selling price as shown on the invoice as Rs 2,000, then GST will be calculated at 5% since the invoice value is below Rs 2,500. On the other hand, if the invoice continues to reflect the price as Rs 3,000 and the credit card company later provides cashback or benefit outside the invoice, GST will still apply at 18% on Rs 3,000.Also read: Father gets relief in Supreme Court in 6-year long battle for child visitation rights; know how he foughtMehta explains:Scenario A: Customer uses Credit card benefit:Value of apparel- Rs 3,000Discount on use of credit card- Rs 1,000Net value for customer- Rs 2,000Total sale value to be considered for invoicing purposes- Rs 2,000 + 1000 considering total amount of discount will be reimbursed by the bank= Rs 3,000Since total value is more than Rs 2,500 then applicable rate of GST will be 18%.Scenario B: Customer does not use Credit card benefit:Value of apparel- Rs. 3,000No Discount, sale value of apparel- Rs. 3,000falls in category of sale value exceeding Rs 2,500 – applicable rate of GST – 18%Joshi says: “The e-commerce portals will need to make necessary changes on its platform to align with the rate change.”