Trademark Registration for Selling on Amazon
18 Aug, 2025
By Online Legal India
Published On 18 Aug 2025
Category GST
Understanding the GST rate for leather is crucial for people who buy, sell, or export leather products. GST affects the pricing and tax rules for raw leather, finished goods such as bags and shoes, and processed leather. Knowing the GST rates helps leather businesses to stay updated, avoid fines, and maintain tax duties in a changing market. In this blog, you will learn about the GST rate for leather in India.
Goods and Services Tax (GST) refers to a single and unified tax system used across India. This system replaces various taxes such as VAT, excise duty, and service tax. GST charges one tax on most goods and services to make the tax collection simple. This system helps to reduce the overall tax burden and develop transparency. Businesses and consumers can follow tax rules more easily and the years ahead.
Here is a detailed explanation of the GST rate for leather:
The 5% GST rate is applicable for raw hides, skins, and unprocessed leather. This low rate is applicable for leather in its natural or untreated form. There is no or minimal processing that has happened after getting the animal skin. This 5% rate is useful for small leather businesses and suppliers to deal with raw materials. It supports the trading of unprocessed goods without adding a tax burden.
The GST rate increases to 12% if leather is processed or finished for manufacturing products. This category includes cleaned, tanned, dyed, or processed leathers to improve their quality and appearance. Finished leather is useful for making goods, including shoes, bags, gloves, and more. The 12% tax covers the added value during the processing of raw hides.
The highest 28% GST is applicable for leather products such as handbags, belts, footwear, and wallets. This highest rate is applicable due to its ready-made consumer goods. The government applies the highest GST on finished products that are sold directly to customers to match the market value. However, some specific leather items, such as sports gloves, have a lower 12% GST rate. This lower rate helps in specialised use and several market segments.
Job work means services where a business processes or manufactures leather or leather goods for another company. These services have a 12% GST rate. This includes work such as tanning raw hides, cutting leather, assembling footwear, and so on. The 12% rate is applicable due to its job work adds value to the raw material or semi-finished goods.
The government plans to a changes to simplify GST slabs. It focuses on reducing the 12% tax rate and shifts products that are taxed at 12% to either the 5% or 18% slabs. These changes will be useful for many leather-related items to get a new GST rate, which helps to lower taxes for some products. These changes seek to make GST easier to manage and reduce confusion. However, there is no exact date or detailed plan has been announced.
GST affects both positively and negatively on Indian labour exporters. The highest GST rate is considered a major concern for finished leather products. This leads to an increase in cost and reduces the ability to compete in international markets. On the positive side, exporters are eligible to claim GST refunds to reduce their tax burden. This also helps to make the customs procedures. There are some exemptions for merchants to provide additional relief. The leather industry has requested for lowering the GST rates to the government. They also requested to provide an IGST exemption on imported raw materials. These steps will be useful to reduce costs and boost exports.
Input Tax Credit (ITC) is considered a major benefit under GST for the leather industry. If a business claims ITC, it will be able to reduce the tax it pays for GST on raw materials, machinery, and other inputs. This helps to lower the 0overall costs and improves cash flow. Leather manufacturers and exporters can use ITC to reduce their GST liability on finished products and to make the price competitive. An ITC can be claimed with proper documentation and compliance.
The Goods and Services Tax (GST) system in India significantly influences the leather industry, affecting pricing, competitiveness, and business operations. Here is a detailed breakdown of how GST rates impact the leather sector:
The GST rate on finished leather products was increased from 5% to 12% in 2022. This helps to raise the cost of manufacturing and selling leather goods, including wallets, handbags, and belts. On the other hand, businesses are eligible to pass these additional costs on to consumers, which leads to higher retail prices. This price increase can reduce consumer demand, specifically for premium leather items.
Leather accessories, including wallets and handbags, have a GST rate of 18%. This higher tax rate increases the final retail price. This helps in making products less affordable for consumers. As a result, businesses may experience decreased sales and suffer problems in maintaining profit margins.
The higher GST rates on leather products make synthetic alternatives more attractive for manufacturers and consumers. Synthetic materials contain lower tax rates and can be produced at a lower cost. This can cause a reduced demand for genuine leather goods. This shift can impact the traditional leather industry, for a decline in its market share.
Indian leather exporters face significant challenges due to high GST rates and international trade barriers. The United States, a major market for Indian leather goods, has imposed steep tariffs, escalating the total tariff rate to 50%. This situation threatens the competitiveness of Indian leather products in the global market, potentially leading to order cancellations and a shift of business to competing nations like Bangladesh, Vietnam, and Pakistan.
The leather industry must navigate complex GST compliance requirements, including accurate HSN classification, timely returns, and maintaining proper documentation. These obligations can be burdensome, especially for small and medium-sized enterprises, leading to increased operational costs and potential legal challenges.
The Indian government is considering a significant overhaul of the GST system, including the removal of the 12% tax slab. If implemented, this change could lower the tax burden on leather products, potentially reducing retail prices and making Indian leather goods more competitive in both domestic and international markets. However, specific timelines for these changes have not been announced.
Conclusion
Understanding the GST rates and rules for leather products is essential for anyone in the leather business. If you know the right GST slab, it will help avoid penalties and manage costs better. Leather manufacturers and exporters can stay compliant, save money through input tax credits, and improve their business growth. Staying updated with GST changes ensures smoother operations and keeps your leather business competitive in today’s market. If you go for GST registration, contact Online Legal India to get assistance.
The GST rate on raw hides and skins is generally 5%, but businesses should check the latest government notifications for exact details.
Finished leather products usually attract an 18% GST rate as per the latest slabs.
Yes, leather exporters can claim GST refunds on exported goods under the zero-rated supplies scheme.
Yes, leather manufacturers can claim ITC on GST paid for raw materials, machinery, and other business inputs.
Certain exemptions and lower rates apply for specific products or merchants, but this varies and must be checked with the latest GST rules.
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