Imitation zari yarn under HSN 56050020 taxable at 5% GST under Notifications 9/2023 and 9/2025-CT (Rate)

The AAR held that metallic zari thread or yarn manufactured from metallized polyester/plastic film, known in trade as imitation zari, is classifiable under HSN 56050020. For the period post 26.07.2023, such goods fall under Serial No. 218AA of N/N. 9/2023-CT (Rate) and attract GST at 5%. The AAR further noted that N/N. 1/2017-CT (Rate) stands superseded by N/N. 9/2025-CT (Rate) with effect from 22.09.2025, under which metallised yarn, including imitation zari thread or yarn, is covered by Serial No. 353 of Schedule I, also taxable at 5%. Accordingly, the applicant's supplies are liable to GST at 5% both under the earlier and the superseding notification.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Classification of Badla / imitation jari / metallic yarn manufactured from micro-slitting of plain polyester film, metallised polyester film or metallised & lacquered film under Heading 5605 of the Customs Tariff.

1.2 Applicable GST rate and time-period for supplies of such imitation zari thread or yarn in light of Notification No. 1/2017-CT (Rate), Notification No. 9/2023-CT (Rate), Circular No. 205/17/2023-GST and Notification No. 9/2025-CT (Rate).

1.3 Maintainability of certain questions on distinction between "metalized yarn" and "metallic yarn", refund eligibility, and alternate classification attracting 12% GST, within the scope of Section 97(2) of the CGST Act, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of Badla / imitation jari / metallic yarn under Heading 5605

(a) Legal framework discussed

2.1 The Court examined Heading 56.05 of the Customs Tariff Act, 1975 and its HSN Explanatory Notes describing "metallised yarn, whether or not gimped, being textile yarn, or strip or the like of heading 54.04 or 54.05, combined with metal in the form of thread, strip or powder or covered with metal", including products consisting of a core of plastic film coated with metal dust and sandwiched between plastic films.

2.2 The specific tariff lines under Heading 5605 were noted:

(i) 5605 00 10 - Real zari thread (gold) and silver thread combined with textile thread.

(ii) 5605 00 20 - Imitation zari thread.

(iii) 5605 00 90 - Other.

2.3 Notification No. 1/2017-CT (Rate), Sr. No. 137 (Schedule II) was considered, covering "Metallised yarn ... such as Real zari thread ... Imitation zari thread" at 12% GST.

2.4 Notification No. 9/2023-CT (Rate) inserting Entry 218AA in Schedule I was examined, specifying tariff item 56050020 as "Imitation zari thread or yarn known by any name in trade parlance" at 5%, and simultaneously amending Sr. No. 137 so as to exclude real zari and imitation zari thread or yarn therefrom.

2.5 Circular No. 205/17/2023-GST dated 31.10.2023 was relied on, clarifying that imitation zari thread or yarn made from metallised polyester film/plastic film falling under HS 5605 are covered by Sl. No. 218AA of Schedule I (5% GST).

2.6 The Court also referred to the minutes of the 15th and 52nd GST Council Meetings, which recorded that:

(i) Embroidery or zari articles like imi, zari, kasab, saima, dabka, chumki, gota, sitara, naqsi, kora, glass beads, badla, gizal are to be taxed at 5%.

(ii) Imitation zari thread or yarn made from metallised polyester film/plastic film is covered by Heading 5605 and leviable to 5% GST.

(b) Interpretation and reasoning

2.7 The Court differentiated three broad categories in trade: real zari, imitation zari and metallic zari. Metallic zari was found to be made of slitted polyester metallised film and is the prevalent, lighter, cheaper and more durable form, used in place of traditional real or imitation (copper-based) zari.

2.8 On a conjoint reading of:

(i) Heading 5605 and its explanatory notes;

(ii) The structure of tariff sub-headings 5605 00 10, 5605 00 20 and 5605 00 90;

(iii) Notification No. 1/2017-CT (Rate) and its amendment by Notification No. 9/2023-CT (Rate);

(iv) Circular No. 205/17/2023-GST; and

(v) The GST Council minutes dealing with zari and imitation zari;

the Court concluded that metallic zari thread or yarn made from metallised polyester film/plastic film is nothing but imitation zari thread or yarn for tariff and GST purposes.

2.9 The Court noted that Entry 218AA specifically ties "Imitation zari thread or yarn known by any name in trade parlance" to tariff item 56050020. Having regard to the trade parlance names (including badla, kasab, etc.) and the Council's intention to cover imitation zari made from metallised polyester/plastic film, the Court held that the subject goods fall within 5605 00 20.

2.10 The Court explicitly found that the supply of Badla / Imitation Jari / Metallic Yarn made from micro-slitting of plain polyester film, metallised polyester film or metallised & lacquered film is classifiable as "Imitation zari thread" under tariff item 5605 00 20 and not under the residual 5605 00 90.

(c) Conclusion on Issue 1

2.11 The Court held that the supply of Badla / Imitation Jari / Metallic Yarn made from micro-slitting of plain polyester film, metallised polyester film or metallised & lacquered film falls under HSN 5605 00 20 as imitation zari thread or yarn known by any name in trade parlance.

Issue 2 - Applicable GST rate and time-period for such goods

(a) Legal framework discussed

2.12 The Court analysed the rate structure under Notification No. 1/2017-CT (Rate) and its amendment:

(i) Prior to 26.07.2023, Sr. No. 137 of Schedule II covered "Metallised yarn ... such as Real zari thread ... Imitation zari thread" at 12% GST.

(ii) Notification No. 9/2023-CT (Rate) dated 26.07.2023:

* Inserted Sr. No. 218AA in Schedule I specifying 56050020 - "Imitation zari thread or yarn known by any name in trade parlance" at 2.5% CGST (i.e., 5% total GST);

* Amended Sr. No. 137 in Schedule II to expressly exclude: (i) real zari thread (gold) and silver thread combined with textile thread and (ii) imitation zari thread or yarn known by any name in trade parlance.

2.13 Circular No. 205/17/2023-GST clarified that imitation zari thread or yarn made from metallised polyester film/plastic film falling under HS 5605 is covered under Sl. No. 218AA attracting 5% GST, and that no refund would be permitted on polyester film (metallised)/plastic film on account of inverted duty.

2.14 The Court further noted that Notification No. 1/2017-CT (Rate) has been superseded by Notification No. 9/2025-CT (Rate) dated 17.09.2025, effective from 22.09.2025, wherein "Metallised yarn ... including real zari thread (gold) and silver thread combined with textile thread, imitation zari thread or yarn known by any name in trade parlance" is placed at Sr. No. 353 of Schedule I, attracting 5% GST.

(b) Interpretation and reasoning

2.15 Having held that the goods are classifiable under 5605 00 20 as imitation zari thread or yarn, the Court applied Entry 218AA to such goods for the relevant period under Notification No. 1/2017-CT (Rate).

2.16 For the period after the supersession of Notification No. 1/2017-CT (Rate), the Court noted that Notification No. 9/2025-CT (Rate) continues to place metallised yarn including imitation zari thread or yarn in Schedule I at 5%, thereby preserving the concessional rate for the same goods from 22.09.2025 onwards.

(c) Conclusions on Issue 2

2.17 For supplies of Badla / Imitation Jari / Metallic Yarn classifiable under 5605 00 20, the Court held:

(i) GST rate is 5% (Schedule I, Sr. No. 218AA of Notification No. 1/2017-CT (Rate) as amended by Notification No. 9/2023-CT (Rate)) for the period from 27.07.2023 to 21.09.2025; and

(ii) GST rate continues to be 5% (Schedule I, Sr. No. 353 of Notification No. 9/2025-CT (Rate)) with effect from 22.09.2025.

Issue 3 - Maintainability and scope under Section 97(2) of the CGST Act

(a) Legal framework discussed

2.18 Section 97(1) and 97(2) of the CGST Act, 2017 were reproduced, listing the permissible questions on which advance ruling can be sought, namely: classification of goods/services, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of liability to pay tax, requirement of registration, and whether a particular activity amounts to supply.

(b) Interpretation and reasoning

2.19 The Court examined each of the applicant's questions against the scope of Section 97(2) and concluded:

(i) The general question as to whether any significant difference exists between "Metalized Yarn" and "Metallic Yarn" and what their classification would be, as posed, did not fall within the specific heads enumerated in Section 97(2), and therefore was not required to be answered.

(ii) Questions seeking rulings on eligibility for refund of input tax on inputs such as polyester yarn, lacquered film, chemicals, packing material and coal, and questions contingent on an alternate classification (5605 00 90, 12% GST) were outside the scope of Section 97(2), which does not include adjudication on refund entitlement.

(iii) Once classification under 5605 00 20 and the applicable rate of 5% were determined, the question premised on classification under 5605 00 90 and liability to 12% GST became infructuous.

(c) Conclusions on Issue 3

2.20 The Court held:

(i) The question relating to distinction between "Metalized Yarn" and "Metallic Yarn" and their classification, as framed, was not answered as it did not fall within the ambit of Section 97(2).

(ii) Questions seeking advance ruling on refund of input tax credit on various inputs were not answered as they do not fall within any clause of Section 97(2).

(iii) The question presupposing classification under 5605 00 90 and application of 12% GST was rendered infructuous in view of the finding that the goods fall under 5605 00 20 at 5% GST.

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