**Summary:**
This document summarizes the Indian government's response to a parliamentary question (Lok Sabha Unstarred Question No. 2450) regarding Goods and Services Tax (GST) exemptions for Khadi and Village Industries Commission (KVIC) products. The question, posed by Adv K. Francis George, addresses concerns about the high production costs of handmade KVIC products and the imposition of GST, with some products taxed up to 12%.
The Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, acknowledges that Khadi production is labor-intensive, contributing significantly to product costs. The response clarifies that GST rates are determined by the GST Council, a constitutional body with representation from States/Union Territories and the Centre. Currently, Khadi yarn and fabric sold from KVIC outlets, Gandhi Topi, and the Indian National Flag are exempt from GST (Nil rate). Most handmade textile products attract a concessional GST rate of 5%. Handmade apparel and clothing accessories (knitted or crocheted) with a sale value up to Rs. 1000 per piece are subject to 5% GST, while those exceeding this value attract 12% GST.
The response further indicates that the GST Council, during its 45th meeting on September 17, 2021, established a Group of Ministers (GoM) on GST Rate Rationalization. This GoM is tasked with reviewing the existing GST rate structure and recommending potential rationalizations.
Key Entities Referenced
Khadi Village Industries Commission (KVIC): A statutory body established by an Act of Parliament, it promotes and develops Khadi and village industries.
Goods and Services Tax (GST): An indirect tax levied on the supply of goods and services in India.
GST Council: A constitutional body in India responsible for making recommendations on GST-related issues.
Shri Pankaj Chaudhary: Minister of State in the Ministry of Finance.
Group of Ministers (GoM): A committee constituted by the GST Council to review and recommend rationalization of GST rates.
Indian National flag: The national flag of India, which attracts Nil GST.
45th GST Council Meeting: Meeting of the GST Council held on 17th September, 2021, where a GoM on GST Rate Rationalisation was constituted.
States/UTs: Refers to the States and Union Territories of India, which are represented in the GST Council.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 2450
TO BE ANSWERED ON MONDAY, AUGUST 04, 2025/ SRAVANA 13,
1947(SAKA)
EXEMPTION FOR KHADI & VILLAGE INDUSTRIES PRODUCTS FROM GST
2450. ADV K. FRANCIS GEORGE:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government is aware of the fact that the products of
Khadi & Village Industries Commission (KVIC) are handmade and the
cost of production is high;
(b) whether it is also a fact that certain products of KVIC are being
taxed upto12 per cent of GST; and
(c) if so, whether the Government is considering to exempt all Khadi
products from GST to 54 provide/sustain employment in this traditional
sector of the country?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) The production process of Khadi products is hand spun and hand
woven in nature and it is a labour/artisan intensive activity. Due to this
fully manual nature of operations in manufacturing Khadi and Village
Industry products, the manufacturing cost constitutes a significant
portion of the overall product cost.
(b) GST rates are prescribed on the recommendations of GST Council,
which is a constitutional body comprising of representatives from
States/UTs and Centre. Khadi yarn and Khadi fabric sold from KVIC
outlets, Gandhi Topi and Indian National flag attract Nil GST. Most
handmade textile products attract concessional GST rate of 5%.
Handmade articles of apparel and clothing accessories, knitted or
crocheted, of sale value upto Rs. 1000 per piece attracts 5% GST and
12% otherwise.
(c) The GST Council in its 45th meeting held on 17th September, 2021,
has constituted a Group of Ministers (GoM) on GST Rate Rationalisation.
The terms of reference of the GoM include review of the current rate
slab structure of GST and recommend rationalization of rates.
*****