Handloom Saree Shops in Telangana: GST and Income Tax Guide 2026

What is the GST rate on handloom sarees in Telangana? Sarees are fabric, not garments, so a Pochampally, Gadwal, Narayanpet or Siddipet saree is taxed at 5% GST at any price. Silk sarees fall under heading 5007, cotton under 5208 to 5212, and synthetic under 5407/5408 (Notification 9/2025-Central Tax (Rate), Schedule I). The Rs 2,500 rule, and the 18% rate above it, applies only to stitched garments like blouses. For income tax, most saree shops can use presumptive taxation at 6% of digital receipts and 8% of cash receipts (old Section 44AD, now Section 58 of the Income-tax Act, 2025).

Telangana's handloom sarees are known across India. Pochampally Ikat, Gadwal, Narayanpet and Siddipet Gollabama sarees all carry Geographical Indication tags, and they are sold by small family shops in Hyderabad, Pochampally (Bhoodan Pochampally), Gadwal, Narayanpet and Warangal as well as by large showrooms.

The tax rules for these shops are simpler than most traders think, but two errors are very common: billing costly sarees at 18% as if they were garments, and putting the saree and a stitched blouse on one line at one rate. This guide covers the GST rate and HSN code for each type of saree, how to bill blouses, when you need GST registration in Telangana, how presumptive income tax works for a saree shop, and the Telangana schemes for handloom weavers.

GST on Sarees: 5% at Any Price

The rule that matters most for a saree shop: a saree is a fabric, not a readymade garment.

CBEC Circular No. 1054/03/2017-CX (15 March 2017) records that a saree is specifically classified in Chapters 50, 52 and 54 of the tariff according to its fibre. It also clarified that embroidery, lace or tikki work, a fixed fall, or stitching two fabrics together does not turn a saree into a "made-up" article of Chapter 63, because no new product with a different name, character or use comes into being. GST rates follow the same tariff classification.

All the woven fabric headings that cover sarees are in Schedule I (5%) of Notification 9/2025-Central Tax (Rate), which has applied since 22 September 2025.

GST Rate and HSN Code by Fibre

A Gadwal saree usually has a cotton body and a silk border (pallu). Where a saree mixes fibres, Section Note 2(A) of Section XI of the tariff classifies it by the fibre that predominates by weight, and the circular confirms this for sarees. Either way, cotton and silk sarees are both 5%, so the rate does not change, only the HSN code.

Because the rate depends on classification and not on price, a Rs 50,000 silk saree and a Rs 600 cotton saree are both billed at 5%.

HSN Digits on Your Invoice

Under Notification 78/2020-Central Tax, a business with turnover up to Rs 5 crore in the previous year must show at least a 4-digit HSN on B2B tax invoices (5007, 5208 and so on). Above Rs 5 crore, 6 digits are mandatory on all invoices. Using the right heading for each fibre keeps your GSTR-1 HSN summary clean.

Blouses, Pre-Stitched Sarees and Other Items

The Rs 2,500 rule is real, but it applies to garments and made-ups of Chapters 61, 62 and 63, not to sarees.

Sources: Notification 9/2025-Central Tax (Rate), Schedule I S.No. 371, 372, 388 to 390 and Schedule II S.No. 197 to 199.

Pre-stitched or "ready-to-wear" sarees are a grey area. If the product is still essentially a saree with a stitched pleat or fall, the circular's reasoning keeps it as a saree at 5%. If it has been converted into a garment that is worn like a lehenga or a gown, it is likely to be treated as a Chapter 62 garment, and the Rs 2,500 test then applies. Decide product by product, and keep a note of why you classified it that way.

There is no 12% rate for sarees. The 12% slab was removed when GST rates were rationalised from 22 September 2025, so a "12% on embroidered sarees" rule you might see in old billing software is out of date.

Practical rule: when a customer buys a saree and a stitched blouse together, show them as two lines on the same invoice: the saree at 5% under its fabric heading, the blouse at 5% or 18% under Chapter 62 depending on its own price. For more on garment rates, see our guide to GST on textiles and garments.

Are Handloom Sarees Exempt From GST?

No. The GST exemption list, Notification 10/2025-Central Tax (Rate), exempts only these textile items:

• silkworm laying and cocoons, raw silk and silk waste (S.No. 138 to 140),
• Gandhi topi and khadi yarn (S.No. 144),
• khadi fabric sold through KVIC and KVIC-certified institutions or outlets (S.No. 145), and
• handloom weaving machinery (S.No. 158).

Handloom sarees, even GI-tagged ones, are not on the list and attract 5%. A weaver or small shop that is not registered under GST simply does not charge GST, because only registered persons can collect it. That is a registration question, not an exemption.

GST Registration and Returns for Saree Shops

Registration Threshold in Telangana: Rs 20 Lakh

The higher Rs 40 lakh limit for suppliers of goods (Notification 10/2019-Central Tax) applies only in States that opted for it. Telangana did not opt in, so a saree shop in Telangana must register once aggregate turnover crosses Rs 20 lakh in a financial year (Section 22(1) of the CGST Act).

You may need to register even below Rs 20 lakh, for example if you make interstate sales of sarees, including sales to buyers in other States through an online marketplace (Section 24 of the CGST Act). Our guide to the GST registration turnover limit explains these exceptions, and the GST registration process walks through the documents.

Regular Scheme or Composition?

A saree shop or weaver with turnover up to Rs 1.5 crore in the previous year can opt for the composition scheme and pay 1% of turnover (0.5% CGST + 0.5% SGST).

Composition suits a shop that sells only within Telangana to walk-in customers. A shop that sends sarees to buyers in other States, or sells mostly to other businesses that want credit should stay in the regular scheme. More details in our GST composition scheme guide.

Return Due Dates

Most small saree shops qualify for the quarterly QRMP scheme and pay tax monthly through PMT-06.

Input Tax Credit on Yarn, Dyes and Packing

A regular taxpayer can claim credit on silk yarn (S.No. 325), cotton yarn (S.No. 333) and manmade filament yarn (S.No. 341), all at 5% under Schedule I, as well as on dyes, packing material and shop rent, subject to Section 16 of the CGST Act. The supplier must report your invoice so that it appears in your GSTR-2B. Reconcile every month using our GSTR-2B reconciliation guide.

Income Tax for Saree Shops: Presumptive Taxation

Most handloom saree shops are proprietorships or family partnership firms. The simplest income tax route is presumptive taxation, known for years as Section 44AD. From FY 2026-27 it sits in Section 58(2), Table Sl. No. 1 of the Income-tax Act, 2025, with the same rates and limits.

Who Can Use It

Source: Section 58(2) and 58(11)(a), Income-tax Act, 2025.

The 6% and 8% Rule

A non-account-payee cheque or draft counts as cash (Section 58(9)). You can always declare a higher profit if you actually earn more.

Worked Example

A Pochampally saree shop run as a proprietorship has FY 2026-27 turnover of Rs 80,00,000:

Cash is 18.75% of turnover, so the Rs 2 crore limit applies; Rs 80 lakh is well within it. The shop declares Rs 5,10,000 as business income. No further expenses are deducted from it (Section 58(4)).

If this is the owner's only income, the tax is low. Under the new regime the first Rs 4 lakh is nil and the next slab is 5%, and a resident individual with total income up to Rs 12 lakh gets a full rebate under Section 156(2) of the 2025 Act (old Section 87A). So the owner's tax for the year is nil. See the FY 2026-27 slab rates if you have other income too.

No Tax Audit, but Watch the Five-Year Lock-In

If you declare profit at or above 6%/8%, you do not need a tax audit for this business. Two rules need care:

• Declaring lower profit: if you claim profit below 6%/8% and your total income is above the basic exemption limit, you must keep books and get a tax audit (Section 58(3)).
• Five-year lock-in: if you use the scheme in one year and then declare profit below the presumptive rate in any of the next five years, you cannot use the scheme for the following five years (Section 58(7)). During those years, books and an audit are required whenever your income exceeds the basic exemption limit (Section 58(8)).

A shop with very uneven years, for example heavy wedding-season sales one year and a slow year after, should think about this before opting in. Also note that presumptive taxpayers pay advance tax in one instalment by 15 March (Section 408(2)). Read the full rules in our Section 44AD guide.

Telangana Schemes for Handloom Weavers

These schemes are run by the Telangana Handlooms and Textiles Department for weavers and ancillary workers on geo-tagged looms. A shop owner who only trades in sarees is generally not covered, but many family saree businesses in Pochampally, Gadwal and Narayanpet also weave, and the schemes put money directly into weavers' accounts. Figures are from the Telangana Socio Economic Outlook 2026 (Planning Department).

Nethanna Podhupu continues the earlier Telangana Handloom Weavers Thrift Fund Saving and Security Scheme (Nethannaku Cheyutha), and Nethanna Bima was launched on National Handloom Day, 7 August 2022. Nethanna Podhupu now runs under the "Telangana Chenetha Abhayahastha Padakam". Eligibility is checked by the Handlooms and Textiles Department, so contact its district office or a weavers' cooperative society to enrol.

Central Schemes Worth Knowing

The Ministry of Textiles also runs schemes that help weavers and the shops they supply (Lok Sabha reply, 24 March 2026):

• Weaver MUDRA loans: margin money of 20% of the loan (up to Rs 25,000 for an individual weaver), interest subvention, and credit guarantee fee support for 3 years.
• Raw Material Supply Scheme: freight reimbursement on yarn and a 15% price subsidy on cotton hank yarn, domestic silk, wool and linen, within quantity caps.
• Handloom Mark and India Handloom Brand: quality labels that help a shop prove a saree is genuinely handwoven.

GI-Tagged Telangana Handlooms

The Geographical Indications Registry lists these Telangana products as registered, so only producers in the defined area can use the name:

A GI tag protects the name. It does not change the GST rate: a GI-tagged Gadwal silk saree is still 5% like any other silk saree. As of October 2026, no GST notification exempts handloom sarees, and the 5% rate applies.

GST and Tax Checklist for Saree Shops

• Register for GST once turnover crosses Rs 20 lakh in Telangana, or earlier for interstate or online sales.
• Set HSN codes in your billing software by fibre: 5007 silk, 5208 to 5212 cotton, 5407/5408 synthetic.
• Bill every saree at 5%, whatever its price.
• Bill ready-stitched blouses, kurtas and dupattas on separate lines at 5% or 18% under the Rs 2,500 rule.
• Delete any 12% rate still set up in old billing software.
• File GSTR-1 and GSTR-3B on time (monthly, or quarterly under QRMP).
• Reconcile input tax credit on yarn, dyes and packing with GSTR-2B every month.
• Decide between Section 44AD (Section 58) and regular books, keeping the five-year lock-in in mind.
• Keep UPI and bank receipts separate from cash in your records, since they decide the 6% vs 8% split.

Common Mistakes Saree Shops Make

Where Tax Garden Helps

Saree and handloom shops deal with fabric classification, the garment threshold, Telangana's lower registration limit and presumptive income tax all at once. Tax Garden can:

• set up the right HSN code and rate for each saree, blouse and dress material,
• register your shop under GST and choose between the regular and composition schemes,
• file GSTR-1 and GSTR-3B and reconcile input tax credit with GSTR-2B,
• check whether Section 44AD (Section 58) suits your shop and track the five-year rule, and
• reply to GST and income tax notices.

If you are in Hyderabad or nearby districts, see our GST filing services in Hyderabad. Shops that also sell readymade clothes can read our guide for clothing and footwear shop owners, and boutiques that stitch blouses should see the guide for tailors and boutique owners.

Sources: Notification No. 9/2025-Central Tax (Rate), Schedules I and II; Notification No. 10/2025-Central Tax (Rate) (exemptions); CBEC Circular No. 1054/03/2017-CX dated 15 March 2017 (classification of saree); Notification No. 10/2019-Central Tax (Rs 40 lakh option for goods); Notification No. 78/2020-Central Tax (HSN digits); CGST Act, 2017, Sections 10, 16 and 22; Income-tax Act, 2025 as amended by the Finance Act, 2026, Sections 58, 156 and 408. Telangana Socio Economic Outlook 2026, Planning Department, Government of Telangana (handloom schemes, section 6.3.3); Telangana Socio Economic Outlook 2025; Ministry of Textiles Lok Sabha reply of 24 March 2026 (PIB); Geographical Indications Registry, State-wise list of registered GIs (ipindia.gov.in). This article is general information, not professional advice. Check cbic-gst.gov.in and incometaxindia.gov.in for later changes before acting.

Frequently Asked Questions

What is the GST rate on Pochampally and Gadwal sarees?

5%. A silk saree is classified with woven silk fabrics under heading 5007, a cotton saree under headings 5208 to 5212, and a synthetic saree under 5407 or 5408. All of these are in Schedule I (5%) of Notification 9/2025-Central Tax (Rate), so the rate is 5% whatever the price of the saree.

Is 18% GST charged on sarees priced above Rs 2,500?

No. The Rs 2,500 per piece test applies only to garments and made-up articles of Chapters 61, 62 and 63. A saree is classified as fabric under Chapters 50, 52 or 54, as confirmed by CBEC Circular 1054/03/2017-CX, so it is 5% even at Rs 50,000.

Does embroidery, zari or a stitched fall change the GST rate on a saree?

Generally no. CBEC Circular 1054/03/2017-CX clarified that a saree with embroidery, lace, tikki work, a fixed fall, or two fabrics stitched together remains a saree classified under Chapter 50, 52 or 54 by its main fibre, and not a made-up of Chapter 63. Each case depends on whether the product is still essentially a saree.

What GST rate applies to a stitched blouse sold with a saree?

A ready-stitched blouse is a garment of Chapter 62. It is 5% if its sale value is up to Rs 2,500 per piece and 18% if above. Show it as a separate line on the invoice. An unstitched blouse piece that comes attached to the saree is part of the saree fabric.

Are handloom sarees exempt from GST?

No. The GST exemption list (Notification 10/2025-Central Tax (Rate)) exempts raw silk, silkworm cocoons, khadi yarn and khadi fabric sold through KVIC and KVIC-certified outlets, and handloom weaving machinery. Handloom sarees are not on it and are taxed at 5%. A weaver or shop that is not registered under GST does not charge GST at all.

What is the GST registration limit for a saree shop in Telangana?

Rs 20 lakh of aggregate turnover. Telangana did not opt for the higher Rs 40 lakh limit for goods under Notification 10/2019-Central Tax, so the Section 22(1) limit of Rs 20 lakh applies. Interstate sales, including online sales to buyers in other States, can require registration below this limit.

Can a saree shop opt for the GST composition scheme?

Yes, a trader or manufacturer of sarees with turnover up to Rs 1.5 crore in the previous year can opt for composition and pay 1% of turnover. The catch is that a composition dealer cannot make interstate sales, cannot collect GST from customers, and cannot claim input tax credit. Since sarees are only 5%, compare both options before choosing.

Can I use Section 44AD for my saree shop?

Yes, if you are a resident individual, HUF or partnership firm (not an LLP) and turnover is up to Rs 2 crore, or up to Rs 3 crore if cash receipts are within 5% of turnover. You declare at least 6% of receipts by bank or digital modes and 8% of other receipts as profit. From FY 2026-27 this is Section 58(2), Table Sl. No. 1 of the Income-tax Act, 2025.

What happens if I leave Section 44AD after one year?

If you declare presumptive profit in one year and then declare lower profit in any of the next five years, you cannot use the scheme for the following five years (Section 58(7) of the 2025 Act, old Section 44AD(4)). During that time, if your income is above the basic exemption limit, you must keep books and get a tax audit.

Can I claim input tax credit on yarn and dyes for handloom sarees?

Yes, if you are a regular GST-registered taxpayer and meet Section 16 of the CGST Act, including the supplier reporting the invoice so it appears in your GSTR-2B. Silk yarn, cotton yarn and manmade filament yarn are all 5%, the same as sarees, so credit on yarn normally sets off fully against output tax.