The GST Council in its 52nd meeting recommended reducing the GST rate to 5% on imitation zari thread or yarn made from metallised polyester/plastic films falling under HS code 5605.
Accordingly, the Council has clarified that such imitation zari would be covered under entry 218AA of Schedule I attracting 5% GST, as per HS Explanatory Notes which cover yarns combined with metal thread/strip and yarns covered with metal by processes like electro-deposition.
CBIC GST Circular 205/17/2023 dated 31/10/2023: Clarification on Applicability of 5% GST Rate on Imitation Zari Threads/Yarns
Here is a summary of the key points from the CBIC GST Circular 205/17/2023 dated 31/10/2023, which has been issued with reference to Central Tax Rate Notification 20/2023 dated 19/10/2023 to make changes in tax rates:
i) The GST Council in its 52nd meeting on 7th October 2023 recommended reducing GST rate to 5% on imitation zari thread or yarn.
ii) Doubts were raised on whether metal coated plastic films converted to metallized yarn and twisted with other yarns to make imitation zari would fall under 5% GST rate or 12% GST rate.
iii) As per HS Explanatory Notes, heading 5605 covers yarns combined with metal thread/strip and yarns covered with metal by any process including electro-deposition. It also covers products with a metal foil or metal coated plastic film core sandwiched between plastic films.
iv) The GST Council clarified that imitation zari thread/yarn made from metallized polyester/plastic films falling under HS 5605 will be covered under 5% GST rate under entry 218AA of Schedule I.
v) No refund will be permitted on polyester/plastic films on account of inversion of tax rate.