"PM models for polyvastra (polyesterene). Bapu (Mahatma Gandhi) wore khaddar (khadi) to Buckingham Palace, not a Rs 10 lakh suit," Gandhi said in a sharp tweet.
He added: "Haath me Charkha, Dil me Nathuram. No sin in calling a spade a spade and a joker a joker on television," and demanded shutting down the KVIC.
Gandhi was referring to his iconic great-grandfather's historic visit to Britain in 1931, when he met Britain's King George V and Queen Mary, clad in his trademark plain loincloth and a shawl.
In comparison, Modi wore a controversial expensive suit during US President Barack Obama's visit to India in January 2015.
In an earlier tweet, Gandhi said: "Tera Charkha le gaya Chor, Sun le Bapu ye Paigaam, Meri Chitthi tere naam (Your spinning wheel has been stolen -- a message to Bapu)... First, Bapu disappeared from few Rs 2,000 currency notes, now he disappears from KVIC office and calendar. Replaced by Rs 10 lakh-ka suit loving PM."
Protesting the KVIC decision, Mumbai Congress President Sanjay Nirupam said it is "an insult to the Father of Nation".
"We strongly condemn this... and demand that the calendars be withdrawn immediately," Nirupam said in a statement late Friday night.
Maharashtra Congress President Ashok Chavan termed it "an illness of self-patting" plaguing the government and demanded "an apology" for KVIC replacing Gandhi's photos with Modi's in its 2017 diaries and calendars.
"Mahatma Gandhi gave the message of "swadeshi" and self-dependence to the nation, for which the KVIC was formed in 1956... However, this government spares no effort for self-praises even if it's a wrong step," Chavan said in a statement on Friday night.
Decrying what he called attempts to remove the Father of Nation from different spheres, Chavan pointed out that "you cannot erase Mahatma Gandhi from the hearts of the people".
After the matter was first exposed on Thursday, the government and KVIC have been at the receiving end of the ire of masses and political parties.