Right click on the layer >Blending Options >Drop Shadow and make next settings :

Create a circle selection using the Elliptical Marquee tool like shown below.

Press delete to remove the contents in the selected area.

Create a new layer (Ctrl+Shift+N or Layer > New > Layer)

Using the Pen tool, create a path like shown below.

Select the Brush tool the set the options in the option bar as shown below. The option bar is located under the menu bar.
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In the Paths window, right click on the path then choose Stroke Path.

Use the Eraser tool to erase the tag as shown below so that it looks like it is looped around the fabric of the t-shirt.

Choose Layer > Layer Style > Drop Shadow and apply the settings shown below.

Select the layer with the t-shirt.
