Looking for expert help with Income tax and GST for candle makers 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
- Candles are 5% GST (Notification 9/2025-CT(R), Schedule I, S. No. 253), whatever the wax, scent or container.
- Paraffin wax (S. No. 31), fragrance oils (S. No. 59) and glass jars (S. No. 250 / 252) are 18%. Beeswax (S. No. 98), wicks (S. No. 383) and paper cartons (S. No. 322) are 5%.
- With 18% inputs and a 5% output, credit can pile up. Section 54(3)(ii) and Rule 89(5) let you claim it back in cash.
- Selling at a Diwali mela in another State usually needs casual registration and an advance tax deposit. Handcrafted candles are exempt from that under Notification 56/2018-CT, with conditions.
- Income tax: Section 44AD deems 6% of digital receipts and 8% of cash receipts as profit, for turnover up to Rs 2 crore (Rs 3 crore with cash within 5%).
What is the GST rate on candles? Candles, tapers and the like (HSN 3406) are taxed at 5% GST under Schedule I, S. No. 253 of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. The rate covers paraffin, soy, gel and beeswax candles and filled jar candles. Paraffin wax itself is 18% (Schedule II, S. No. 31), so most candle makers pay more GST on inputs than they collect.
October to December is when most small candle units make half their year's sales. Diwali diyas, Christmas pillars, corporate gift boxes and wedding orders all land at once. That's also when GST mistakes get made: a jar candle billed at 18% because "glass is 18%", or a stall at a Bengaluru exhibition run without a casual registration. This guide is for home-based candle makers, small moulding units, scented-candle brands and the CAs who keep their books. It covers GST 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.
Candle GST rate and HSN code (3406)
5%, for practically everything a candle unit makes. Notification 9/2025-CT(R) has one entry for heading 3406, and it isn't split by wax or design:
Comparison
GST on Candles and Related Products from 22 September 2025
| Product | GST | Notification entry |
|---|---|---|
| Paraffin pillar, taper and moulded candles | 5% | 9/2025-CT(R), Schedule I, S. No. 253 (3406) |
| Scented, soy, gel and beeswax candles | 5% | Schedule I, S. No. 253 (3406) |
| Filled jar and tin candles, tealights | 5% | Schedule I, S. No. 253 (3406) |
| Handcrafted candles | 5% | Also listed as handicraft goods: 13/2025-CT(R), S. No. 1 |
| Moulded or carved wax figures and articles that aren't candles | 18% | Schedule II, S. No. 621 (9602) |
| Empty glass candle holders sold on their own | 18% | Schedule II, S. No. 252 (7013) |
Source: Notification 9/2025-Central Tax (Rate) and Notification 13/2025-Central Tax (Rate), both 17 September 2025, in force 22 September 2025. Notification 01/2026-Central Tax (Rate), the only rate notification issued in 2026 so far, doesn't touch these entries.
A filled jar candle is still a candle. You bill it at 5% under 3406, not at the 18% rate for glassware. The 18% only matters for the jars you buy, and you take credit for that tax.
Wax figurines need more care. A Ganesha-shaped candle with a wick, sold to be burnt, reads as a candle. A carved wax statue that isn't meant to be lit falls in heading 9602 at 18%. If you make both, set them up as separate items in your billing software.
GST on your inputs: paraffin wax, fragrance, jars and packing
Here's where the usual raw materials sit:
Comparison
GST on Common Candle-Making Inputs
| Input (HSN) | GST | Notification entry |
|---|---|---|
| Paraffin wax, slack wax, micro-crystalline wax (2712) | 18% | 9/2025-CT(R), Schedule II, S. No. 31 |
| Beeswax and vegetable waxes (1521) | 5% | Schedule I, S. No. 98 |
| Artificial and prepared waxes (3404) | 18% | Schedule II, S. No. 69 |
| Fragrance and perfume compounds (3302) | 18% | Schedule II, S. No. 59 |
| Synthetic dyes and colours (3204) | 18% | Schedule II, S. No. 46 |
| Textile wicks for candles (5908) | 5% | Schedule I, S. No. 383 |
| Glass jars and containers (7010) or decorative glassware (7013) | 18% | Schedule II, S. No. 250 / 252 |
| Paper and paperboard cartons and boxes (4819 10, 4819 20) | 5% | Schedule I, S. No. 322 |
Source: Notification 9/2025-Central Tax (Rate), 17 September 2025. Soy wax and blended container waxes are classified by their composition; check the HSN and rate on your supplier's invoice.
Paraffin wax is usually your biggest cost, and it's at 18%. Add fragrance and glass jars, and an 18% credit on most of your purchase bill is set against a 5% tax on sales. Only beeswax candle makers who buy plain wicks and cartons escape the build-up.
Can a candle maker claim an inverted duty refund?
Yes. Section 54(3)(ii) of the CGST Act allows a refund of unused credit where it has built up "on account of rate of tax on inputs being higher than the rate of tax on output supplies". Candles aren't on the list of goods barred from this refund (Notification 5/2017-Central Tax (Rate), as amended).
Rule 89(5) of the CGST Rules gives the formula:
Maximum refund = (Turnover of inverted rated supply x Net ITC ÷ Adjusted total turnover) - (Tax payable on the inverted rated supply x Net ITC ÷ ITC availed on inputs and input services)
"Net ITC" means credit on inputs only. Credit on input services, such as courier charges, rent or repairs, stays in your ledger and isn't refunded.
Example (one month, scented jar candles): a unit sells Rs 5,00,000 of candles, so output tax at 5% is Rs 25,000. It buys:
| Input | Value | GST rate | Credit |
|---|---|---|---|
| Paraffin wax | Rs 2,00,000 | 18% | Rs 36,000 |
| Fragrance oil | Rs 30,000 | 18% | Rs 5,400 |
| Glass jars | Rs 50,000 | 18% | Rs 9,000 |
| Wicks | Rs 10,000 | 5% | Rs 500 |
| Cartons | Rs 20,000 | 5% | Rs 1,000 |
| Total | Rs 3,10,000 | Rs 51,900 |
Credit of Rs 51,900 is more than the Rs 25,000 output tax, so Rs 26,900 builds up in the month. With no input services and only candle sales, the formula gives (Rs 5,00,000 x Rs 51,900 ÷ Rs 5,00,000) minus (Rs 25,000 x Rs 51,900 ÷ Rs 51,900), which is Rs 51,900 minus Rs 25,000 = Rs 26,900.
Over a festive quarter, that's real working capital stuck with the government. Your own figure depends on your wax share, margins and any input services, so run it on your actual GSTR-3B data.
Step-by-Step Guide
Claiming an Inverted Duty Refund (Candle Unit)
Confirm credit is building up
Check that your electronic credit ledger keeps growing after each GSTR-3B, and that the build-up comes from 18% wax, fragrance and jars, not from input services.
Work out the Rule 89(5) amount
Use input credit only for Net ITC. Use your 5% candle turnover as the inverted turnover.
File the claim within two years
The time limit runs from the due date of the GSTR-3B for the period in which the claim arises (Section 54(1) and Explanation 2(e)).
Skip claims under Rs 1,000
Section 54(14) bars refunds of less than Rs 1,000.
Source: CGST Act 2017, Section 54(1), 54(3)(ii), 54(14) and Explanation 2(e); Rule 89(5), CGST Rules 2017
Do you need GST registration, including for exhibitions and online sales?
There are four situations to check:
- Turnover. Section 22(1) of the CGST Act and Notification 10/2019-Central Tax set the limit for goods suppliers at Rs 40 lakh of aggregate turnover. Telangana is one of the States excluded from that limit, so a unit in Hyderabad registers at Rs 20 lakh.
- Sales to other States. Section 24(i) makes registration compulsory for any inter-State taxable supply. One box of candles sent to a gift shop in Pune is enough.
- Festival exhibitions in another State. A seller with no fixed place of business there is a casual taxable person and must register under Section 24(ii). Section 27 says the registration lasts for the period you apply for, up to 90 days, and you pay an advance deposit of your estimated tax when you apply.
- Online marketplaces. Notification 34/2023-Central Tax (from 1 October 2023) lets you sell through Amazon, Flipkart or Meesho without registering, as long as turnover is within the Section 22(1) limit, you sell in only one State, make no inter-State supply, and get an enrolment number on the GST portal against your PAN before your first sale.
Example (Diwali mela): a Hyderabad unit books a 10-day stall in Bengaluru and expects Rs 3,00,000 of machine-moulded candle sales there. It registers as a casual taxable person in Karnataka and deposits 5% of Rs 3,00,000, which is Rs 15,000 (Rs 7,500 CGST plus Rs 7,500 SGST), before the stall opens.
There's one exception that suits artisans. Notification 56/2018-Central Tax exempts casual sellers of handicraft goods, as defined in Notification 21/2018-Central Tax (Rate), from registration. "Handcrafted candles" is S. No. 1 of that list (now Notification 13/2025-CT(R)). The goods must be "predominantly made by hand" with visual or artistic features "amply different from mechanically produced goods". The exemption applies only if your all-India supplies stay within the registration limit. You also need a PAN, and a proviso to Rule 138(1) of the CGST Rules makes you generate an e-way bill for every inter-State consignment, whatever its value.
Once you're registered, Rule 138(1) of the CGST Rules requires an e-way bill before you move goods of consignment value above Rs 50,000. Our GST registration limit guide has the State list, our GST registration service handles both regular and casual applications, and the e-way bill guide walks through the portal.
Composition or regular scheme?
Under Rule 7 of the CGST Rules, a manufacturer on composition pays 1% (0.5% CGST plus 0.5% SGST) of turnover in the State. Candles aren't on the list of goods whose makers are barred from composition (Notification 14/2019-Central Tax), and the turnover limit is Rs 1.5 crore in the preceding year.
Comparison
Composition vs Regular GST for a Candle Maker
| Point | Composition (manufacturer) | Regular scheme |
|---|---|---|
| Tax rate | 1% of turnover in the State | 5% on candles |
| Credit on wax, fragrance, jars, packing | Not allowed | Allowed |
| Inverted duty refund | Not available | Available under Rule 89(5) |
| Corporate gift buyers' credit | Not available; you can't charge GST | Available on your tax invoice |
| Sales to other States | Not allowed (Section 10(2)(c)) | Allowed |
| Exhibition stalls in other States as a casual taxable person | Not allowed (Section 10(2)(f)) | Allowed |
Source: CGST Act 2017, Sections 10(1), 10(2)(c) and 10(2)(f); Rule 7, CGST Rules 2017; Notification 14/2019-Central Tax
The regular scheme often costs a candle unit less than it looks. In the example above, 5% output tax was fully covered by credit and Rs 26,900 more came back as a refund. Composition at 1% would have meant paying Rs 5,000 on Rs 5 lakh of sales, losing all Rs 51,900 of credit, and being shut out of other States. Composition fits a small local maker who buys little paraffin or glass and sells only in their home State. Our composition scheme guide covers the other conditions.
Income tax: Section 44AD for candle makers
Profit from making and selling candles is business income. If you're a resident individual, HUF or partnership firm (not an LLP), Section 44AD of the Income-tax Act 1961 lets you skip detailed profit accounts for FY 2025-26:
- Deemed profit: 6% of turnover received by bank transfer, UPI, cheque or other digital mode, and 8% of the rest. You can declare more.
- Turnover limit: Rs 2 crore, or Rs 3 crore if cash receipts are within 5% of turnover.
- No depreciation on top. Section 44AD(2) treats deductions under Sections 30 to 38 as already allowed, so your melting tanks and moulds get no separate depreciation.
- Five-year lock: opt out after using 44AD and you can't return to it for the next five years (Section 44AD(4)).
From 1 April 2026 (FY 2026-27 onwards) the same scheme is in Section 58 of the Income-tax Act 2025, with the same 6% / 8% rates and Rs 2 crore / Rs 3 crore limits.
Step-by-Step Guide
Working Out Your 44AD Profit (Proprietor, FY 2025-26)
Split turnover by mode
Rs 30,00,000 total: Rs 27,00,000 by bank, UPI or marketplace payout, Rs 3,00,000 in cash at stalls.
Check the limit
Cash is 10% of turnover, above 5%, so the limit is Rs 2 crore. Rs 30 lakh is well within it.
Apply the rates
6% of Rs 27 lakh is Rs 1,62,000; 8% of Rs 3 lakh is Rs 24,000. Deemed profit: Rs 1,86,000.
Work out the tax
With no other income, Rs 1,86,000 is within Rs 12 lakh, so under the new regime the Section 87A rebate brings tax to nil.
Source: Income-tax Act 1961, Section 44AD; Income-tax Act 2025, Section 58
Taking stall payments by UPI instead of cash cuts the deemed rate on that money from 8% to 6%. If your real margin is lower than 6%, for example in a year when paraffin prices rose and you'd already quoted corporate orders, keep full books and claim your actual profit with depreciation. Check the audit rules with your CA first. See our Section 44AD guide and the Section 87A rebate guide.
Missed the 31 August 2026 due date for AY 2026-27 (the date for business income without a tax audit)? A belated return can still be filed up to 31 December 2026 (Section 139(4)), with a late fee of Rs 5,000, or Rs 1,000 if total income is within Rs 5 lakh (Section 234F).
Common mistakes candle makers make
- Billing jar candles at 18%. A filled jar candle is a candle under 3406 at 5%. The 18% applies to the empty jars you buy.
- Leaving inverted credit in the ledger. With paraffin at 18%, most units build up credit. Claim it under Rule 89(5) within two years of the GSTR-3B due date for that period.
- Running an out-of-State stall without registration. Machine-moulded candles need a casual registration and advance deposit. Only handcrafted candles get the Notification 56/2018 exemption, and only within the turnover limit.
- Skipping e-way bills for handicraft consignments. An exempt handicraft seller moving goods to another State needs an e-way bill even below Rs 50,000.
- Choosing composition and then taking corporate Diwali orders. Corporate buyers want a 5% tax invoice they can claim credit on.
- Claiming depreciation under 44AD. Section 44AD(2) already treats it as allowed.
How Tax Garden helps candle makers
We check whether you need regular or casual registration and file it through our GST registration service. We set up your item master so candles, wax figures and holders carry the right HSN and rate. Every month we file GSTR-1 and GSTR-3B through our GST return filing service, and we work out and file your inverted duty refund when credit piles up after the festive season. At year end we compare Section 44AD with your actual profit and file your ITR through our ITR filing service. Call or WhatsApp us on 9640290977.
Related reading: GST for agarbatti makers, another 5% product with 18% inputs, GST for gift shops, who stock your candles, GST for honey and beeswax processors, and GST for pottery and clay diya makers, whose clay lamps are exempt.
