Looking for expert help with GST and income tax for areca nut supari traders India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Dried areca nuts (supari), whether or not shelled or peeled, are 5% GST under Notification 9/2025-CT(R), Schedule I, S. No. 23, from 22 September 2025.
- Fresh areca nuts are nil under Notification 10/2025-CT(R), S. No. 45. Areca isn't on the reverse charge list, so you pay no GST when you buy from growers.
- Pan masala (2106 90 20) has been 40% since 1 February 2026 (Notification 19/2025-CT(R)) and has no Rs 40 lakh registration limit.
- Composition is closed to most supari traders because they sell to other States.
- Cash paid directly to the grower is outside the Rs 10,000-a-day limit. Cash paid to a middleman isn't.
What is the GST rate on areca nut? Dried areca nuts, whether or not shelled or peeled, are taxed at 5% GST (2.5% CGST plus 2.5% SGST, or 5% IGST) under Schedule I, S. No. 23 of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. Fresh areca nuts are nil-rated under Notification 10/2025-Central Tax (Rate). Pan masala made from areca is 40%.
A typical areca trade runs from the garden to the paan counter in three or four hops. A grower in Shivamogga or Dakshina Kannada dries the nuts and sells them at the local market or to a cooperative. A trader there grades the lot into chali or red boiled supari, packs it in jute sacks and ships it by truck to a wholesaler in Gujarat or Uttar Pradesh. That wholesaler sells to cutters, scented-supari makers and pan masala factories. Each hop has its own GST point, and the trader in the middle carries most of the paperwork. This guide covers GST law in force from 22 September 2025 and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 numbers that apply from 1 April 2026.
Areca nut GST rate and HSN code
The line that matters is fresh versus dried. Once the nut is dried, it's 5%, whether you sell it whole, split, peeled or cut.
Comparison
GST on Areca Nut and Related Goods (from 22 September 2025)
| Product (HSN) | GST | Entry |
|---|---|---|
| Fresh areca nuts, whether or not shelled or peeled (0802) | Nil | Notification 10/2025-CT(R), S. No. 45 |
| Dried areca nuts, whether or not shelled or peeled (0802) | 5% | 9/2025-CT(R) Schedule I, S. No. 23 |
| Betel leaves (1404 90 40) | Nil | Notification 10/2025-CT(R), S. No. 93 |
| Food preparations not elsewhere specified, other than pan masala (2106) | 5% | 9/2025-CT(R) Schedule I, S. No. 145 |
| Pan masala (2106 90 20), from 1 February 2026 | 40% | 9/2025-CT(R) Schedule III, S. No. 14, inserted by 19/2025-CT(R) |
| Pan masala (2106 90 20), 22 September 2025 to 31 January 2026 | 28% | 9/2025-CT(R) Schedule VII (14% CGST), omitted by 19/2025-CT(R) |
Source: Notifications 9/2025, 10/2025 and 19/2025-Central Tax (Rate), read from taxinformation.cbic.gov.in. The 2026 rate notifications (01/2026 to 04/2026-CT(R)) don't change any areca entry. IGST on inter-State sales is the same total rate.
Three points trip traders up:
- Drying is the trigger. S. No. 23 reads "Dried areca nuts, whether or not shelled or peeled". The nil entry in 10/2025 covers areca nuts that are "fresh, whether or not shelled or peeled". If you buy raw nuts from a garden and sell them the same week, that sale is nil. If you dry them first, it's 5%.
- Grading and cutting don't change the rate. White chali, red boiled supari and machine-cut pieces all stay "dried areca nuts" under heading 0802, in our reading of the entry. The rate changes only when the product becomes a preparation.
- Sweetened or scented supari is a different heading. Once you add sugar, flavour or other ingredients, the product is no longer a plain nut. It moves to heading 2106. Plain food preparations of 2106 are 5% under S. No. 145, which expressly leaves out pan masala. If your mix is sold as pan masala, it's tariff item 2106 90 20 at 40%. Get the classification confirmed by your CA before you launch a flavoured line, because the rate gap is 35 percentage points.
Buying from growers: no GST, no reverse charge
A grower selling areca from their own garden is an agriculturist supplying "produce out of cultivation of land", so they don't need GST registration for it (Section 23(1)(b) of the CGST Act).
That raises an obvious question: does the trader pay GST under reverse charge instead? No. The reverse charge list for goods in Notification 4/2017-Central Tax (Rate) names cashew nuts in shell, bidi wrapper leaves, tobacco leaves, raw cotton and a few others. Areca nut isn't there, and the October 2026 amendment (Notification 04/2026-CT(R)) doesn't add it. So the purchase from the grower carries no GST at all, and there's no input credit on it either. Your first GST point is your own sale.
Buying from another registered trader is different. That trader charges you 5% on dried nuts, and you can claim that GST as input credit against your own 5% sale.
When an areca trader must register
A trader who deals only in fresh nuts is supplying only nil-rated goods. Section 23(1)(a) of the CGST Act says a person "engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt" isn't liable to register.
Once you sell dried supari, the normal limit applies. A person supplying only goods can stay unregistered up to Rs 40 lakh of aggregate turnover (Notification 10/2019-Central Tax). Karnataka, Kerala and Assam, the main areca-growing States, all use the Rs 40 lakh limit. Telangana, Puducherry, Uttarakhand and the listed north-eastern States don't, so goods traders there register at Rs 20 lakh or Rs 10 lakh. Our registration limit guide has the State-wise list.
Two traps:
- Fresh nut sales count towards the limit. Aggregate turnover includes exempt supplies (Section 2(6) of the CGST Act). A trader with Rs 25 lakh of fresh nut sales and Rs 20 lakh of dried supari sales has crossed Rs 40 lakh, even though only Rs 20 lakh is taxable.
- Selling to another State means registering from the first sale. Section 24(i) makes registration compulsory for anyone making inter-State taxable supplies, whatever the turnover. A Karnataka trader shipping one truck of supari to Ahmedabad must be registered.
The Rs 40 lakh limit isn't available at all to anyone supplying pan masala (Table, S. No. 2 of Notification 10/2019-Central Tax).
Composition scheme and Rule 42 for mixed sales
Composition. A registered trader with aggregate turnover of up to Rs 1.5 crore in the previous year can opt for composition (Notification 14/2019-Central Tax) and pay 0.5% CGST plus 0.5% SGST on "the turnover of taxable supplies of goods and services in the State" (Rule 7 of the CGST Rules, Table S. No. 3). Because the base is taxable supplies, nil-rated fresh nut sales add no composition tax.
The catch is Section 10(2)(c): a composition dealer can't make "any inter-State outward supplies of goods". Most supari leaves the growing districts for buyers in other States, so composition fits only a trader who sells within the State, for example to local cutters and wholesalers. Our composition scheme guide covers the switch-over rules. Pan masala manufacturers can't opt for composition at all (second proviso to Notification 14/2019-Central Tax).
Rule 42 for regular dealers. A regular dealer who sells both fresh (nil) and dried (5%) nuts has to reverse part of the common input credit every month. The formula is D1 = (E ÷ F) x C2, where E is exempt turnover, F is total turnover in the State and C2 is the common credit.
Step-by-Step Guide
Worked Example: One Month for a Karnataka Supari Trader
Sales for the month
A registered trader in Shivamogga sells dried chali for Rs 20,00,000 to a wholesaler in Gujarat (IGST) and fresh nuts for Rs 5,00,000 to a local processor (nil). Total turnover Rs 25,00,000.
Purchases
The dried nuts were bought directly from growers, so no GST was paid on them and there's no credit to claim.
Output tax
5% IGST on Rs 20,00,000 = Rs 1,00,000. The fresh nut sale carries no tax.
Common credit
GST paid on godown rent, a grading machine repair and jute sacks used for both products totals Rs 15,000 for the month (C2).
Rule 42 reversal
Exempt share = Rs 5,00,000 ÷ Rs 25,00,000 = 20%. D1 = 20% x Rs 15,000 = Rs 3,000, reversed in GSTR-3B. Credit left: Rs 12,000.
Cash payable
Rs 1,00,000 less Rs 12,000 = Rs 88,000, paid in cash for the month.
Source: CGST Rules 2017, Rule 42; rates from Notifications 9/2025 and 10/2025-CT(R)
Our Rule 42 and 43 guide explains the annual true-up. For consignments of dried supari worth more than Rs 50,000, you'll also need an e-way bill; our e-way bill guide walks through it.
Income tax: cash to growers, 194Q and Section 44AD
Paying growers in cash. Any business expense paid in cash above Rs 10,000 to one person in a day is disallowed under Section 40A(3) of the 1961 Act (Section 36(4) of the 2025 Act from 1 April 2026). The exception that matters here is for payments for agricultural produce made "to the cultivator, grower or producer" (Rule 6DD(e) of the 1962 Rules; Rule 26(1)(e)(i) of the Income-tax Rules 2026). Say you pay a grower Rs 1,80,000 in cash for 4 quintals of chali. If you bought it from the grower directly, the payment is covered. If the same lot came through a village aggregator, the exception doesn't apply and the full Rs 1,80,000 is disallowed. Keep a signed purchase voucher with the grower's name, village and land details. Our Section 40A(3) guide lists every exception.
TDS on your sales (194Q). A buyer whose turnover exceeded Rs 10 crore in the previous year deducts 0.1% on purchases from you above Rs 50 lakh in the year. That's Section 194Q of the 1961 Act for FY 2025-26, and Section 393(1), Table Sl. No. 8(ii) of the 2025 Act from 1 April 2026. If a pan masala factory buys Rs 1,20,00,000 of supari from you in FY 2026-27, it deducts 0.1% of Rs 70,00,000, which is Rs 7,000. Check that it shows in your Form 26AS before you file. Our 194Q guide has the details.
Growers and agricultural income. A grower's income from selling areca grown on their own land is agricultural income, exempt under Section 10(1) of the 1961 Act. It also covers a process "ordinarily employed by a cultivator" to make the produce fit for market (Section 2(1A)(b)(ii) of the 1961 Act; Section 2(5)(b)(ii) of the 2025 Act). A grower who also buys other growers' nuts and resells them is trading, and that profit is business income. Our agricultural income guide shows how exempt farm income affects the slab on other income.
Section 44AD for traders. A resident individual, HUF or partnership firm (not an LLP) trading in areca can declare presumptive profit:
Comparison
Section 44AD for an Areca Trader (FY 2025-26)
| Point | Rule |
|---|---|
| Turnover limit | Rs 2 crore, or Rs 3 crore if cash receipts are within 5% of turnover |
| Deemed profit | 6% of bank, UPI and other digital receipts; 8% of the rest |
| Commission agents | Not eligible (Section 44AD(6)(ii)): keep books and declare actual profit |
| Opting out | No return to 44AD for the next five years (Section 44AD(4)) |
| From 1 April 2026 | Section 58 of the Income-tax Act 2025, same rates and limits |
Source: Income-tax Act 1961, Section 44AD; Income-tax Act 2025, Section 58
Example: a proprietor's FY 2025-26 supari turnover is Rs 2,60,00,000. Cash receipts are Rs 7,80,000 (3% of turnover), so the Rs 3 crore limit applies. Deemed profit is 6% of Rs 2,52,20,000 (Rs 15,13,200) plus 8% of Rs 7,80,000 (Rs 62,400), so Rs 15,75,600. Under the new regime, tax is nil up to Rs 4 lakh, Rs 20,000 on Rs 4 to 8 lakh, Rs 40,000 on Rs 8 to 12 lakh and 15% of Rs 3,75,600 (Rs 56,340) above Rs 12 lakh, a total of Rs 1,16,340. Income is above Rs 12 lakh, so there's no Section 87A rebate. With 4% cess (Rs 4,654), the tax is Rs 1,20,994, before any other income or deductions. Note that this proprietor's cash payments to growers don't affect the 44AD limit, which looks only at cash receipts.
Common mistakes areca traders make
- Billing dried supari at nil. Only fresh nuts are nil. Dried nuts are 5%, peeled or not.
- Paying reverse charge on grower purchases. Areca isn't on the 4/2017 list, so there's nothing to pay. Paying it anyway just locks up cash.
- Leaving fresh nut sales out of the turnover test. They're exempt, but they still count towards the Rs 40 lakh limit.
- Opting for composition and then shipping to another State. One inter-State sale breaks Section 10(2)(c).
- Paying an aggregator in cash. The produce exception covers only the grower. Cash above Rs 10,000 a day to anyone else is disallowed.
- Calling a flavoured mix "supari" on the invoice. If it's pan masala, it's 40%, and the department will look at the ingredients, not the label.
How Tax Garden helps areca traders
We set up nil and 5% lines for fresh and dried nuts in your billing software, check whether a new flavoured product should sit under 0802 or 2106, and work out your Rule 42 reversal each month. Our GST return filing service files GSTR-1 and GSTR-3B, and new traders can start with GST registration. On the income tax side we reconcile 194Q credits with Form 26AS, compare Section 44AD with your books and file your return through our ITR filing service. For more on related produce trades, see our guides for spice and masala traders and fruit and vegetable wholesalers and commission agents.
