<h2><strong>1. Background: Reduction of GST on Imitation Zari Thread</strong></h2><p>? <strong>In the 50th GST Council Meeting</strong>, the GST rate on <strong>imitation zari thread or yarn</strong> was <strong>reduced to 5%</strong>.<br>? <strong>Sl. No. 218AA</strong> was inserted in <strong>Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017</strong>, confirming the <strong>5% GST rate</strong> for imitation zari.</p><hr><h2><strong>2. Issue: Classification of Metallised Yarn Used in Imitation Zari</strong></h2><p>? <strong>Confusion arose about whether metallised polyester film or plastic film twisted with other yarns (nylon, cotton, polyester, etc.) should be classified as imitation zari thread under 5% GST or metallised yarn under 12% GST.</strong></p><p>? <strong>The dispute involved two classifications:</strong></p><ul><li>✅ <strong>Sl. No. 218AA – Imitation zari thread or yarn (5% GST).</strong></li><li>❌ <strong>Sl. No. 137 – Other metallised yarn (12% GST).</strong></li></ul><hr><h2><strong>3. Clarification: Imitation Zari Thread at 5% GST</strong></h2><p>? <strong>GST Council Decision:</strong></p><ul><li><strong>Imitation zari thread or yarn made from metallised polyester film/plastic film, falling under HS 5605, qualifies for 5% GST.</strong></li><li><strong>Such yarn includes:</strong><ul><li>Metallised polyester film twisted with nylon, cotton, polyester, or other yarn.</li><li>Products where the core consists of metal foil or plastic film coated with metal dust, sandwiched between plastic layers.</li></ul></li></ul><p>? <strong>No Refund for Input Tax Credit (ITC) on Polyester Film (Metallised/Plastic Film):</strong></p><ul><li><strong>To prevent tax inversion</strong>, refund of ITC <strong>on polyester film/metallised plastic film is not allowed</strong>.</li><li><strong>This change was implemented through Notification No. 20/2023-Central Tax (Rate), dated 19.10.2023</strong>.</li></ul><hr><h2><strong>4. Trade Notices & Implementation</strong></h2><p>? <strong>CBIC directs tax authorities</strong> to issue trade notices ensuring businesses understand these clarifications.<br>? Any <strong>challenges in implementation</strong> should be reported to CBIC.<a href="https://cms.plasament.com/storage/shubham-pathak/circular-no-205-17-2023-updated.pdf">circular-no-205-17-2023-updated</a><br> </p>