In a Lok Sabha unstarred question, Adv. K. Francis George inquired whether the government was aware that Khadi & Village Industries Commission (KVIC) products are handmade, leading to high production costs. He also asked if these products are taxed up to 12% GST and if the government would consider exempting them from GST to support employment. In response, Shri Pankaj Chaudhary, Minister of State in the Ministry of Finance, confirmed that Khadi products are indeed handmade and labor-intensive, which contributes to their high manufacturing cost. The minister explained that while some items like Khadi yarn and fabric sold at KVIC outlets, Gandhi Topis, and the Indian National Flag have a "Nil" GST rate, many handmade textile products are taxed at a concessional 5% GST. Hand-stitched apparel and clothing accessories valued under Rs. 1000 attract a 5% GST, while those above this price point are taxed at 12%. The Minister also noted that the GST Council has formed a Group of Ministers (GoM) to review and recommend rationalization of GST rates, which includes the rate slab structure.

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.

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