In May 2026, the Central Board of Indirect Taxes and Customs (CBIC) issued a revised protocol for ITC verification in the textiles and apparel sector. The framework tightens scrutiny of input tax credit claims where fabric sourcing, processing records or supplier GST registration show inconsistencies.
For SME manufacturers and traders, this means advance notices are now arriving, with 14–21 day response windows. Understanding the notice structure, required documentation and audit roadmap helps avoid penalties and unnecessary assessments.
Market signals
Audit notices focus on domestic fabric purchases, job work arrangements and supplier GST compliance. Manufacturers claiming ITC on fabric inputs must now furnish invoices, transporter records and recipient acknowledgements.
Rather than post-assessment audits, CBIC is issuing pre-assessment notices requesting consolidated ITC schedules, supplier verification data and batch-wise fabric traceability within 21 days of notice receipt.
ITC on job-work inputs (dyeing, printing, stitching via unregistered or low-turnover units) faces higher rejection rates. Manufacturers must now maintain GST registration copies and turnover certificates for all job-work vendors.
These notices fall under GST law Section 17(5) (ITC eligibility) and are issued under Rule 36E (CBIC audit procedure). Non-response or inadequate documentation typically triggers proposed assessments of 10–50 lakh rupees and 10–18% interest. Manufacturers should treat these notices as priority compliance items, not advisory requests. Vinayakam Consultants assists textile and apparel firms in assembling ITC schedules, analysing notice content, drafting substantive responses and representing clients before CBIC during post-notice engagement meetings.
Your action checklist
- Create a consolidated ITC register by invoice date, supplier GSTIN and input category (fabric, trims, dyes, outsourcing). Cross-check supplier GST registration status via GST Common Portal (search tool) within 5 working days of notice receipt.
- Compile supplier invoices, delivery challans, transporter way-bills and your inbound goods receipt notes for the notice period (usually 6–12 months prior). Ensure batch-wise traceability links input receipt to finished-goods dispatch.
- For job-work inputs, obtain and attach GST certificates and annual turnover statements from each vendor. If a vendor is unregistered or below threshold, document the reason and exclusion of ITC claimed on their behalf.
- Draft a point-by-point response addressing each query in the notice, citing invoice numbers and GST law provisions. Submit response via email to the notice-issuing officer (copy to your chartered accountant) before the deadline; retain proof of delivery.
Frequently asked questions
The CBIC issues pre-assessment notices with 14–21 day response windows for ITC verification. Manufacturers must furnish consolidated ITC schedules, supplier verification data and fabric traceability within 21 days of notice receipt.
Manufacturers must provide invoices, transporter records, recipient acknowledgements, GST registration copies of job-work vendors and turnover certificates for all suppliers claiming ITC on fabric inputs.
Inadequate documentation typically triggers proposed assessments of 10–50 lakh rupees plus 10–18% interest. These notices should be treated as priority compliance items, not advisory requests.