Looking for expert help with GST and income tax for carpet and durrie 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
- Every carpet, rug, durrie and textile floor covering in Chapter 57 (HSN 5701 to 5705) is 5% GST from 22 September 2025 (Notification 9/2025-CT(R), Schedule I, S. Nos. 358 to 363). Hand-knotted or machine-tufted, the rate is the same.
- Weaving, washing, clipping and finishing done as job work on someone else's carpets is also 5% (Notification 11/2017-CT(R), S. No. 26(ii)(g), as substituted by 15/2025-CT(R)).
- Dyes and synthetic latex are 18%. Carpets aren't on the Notification 5/2017-CT(R) refund-bar list, so a 5% carpet maker can claim an inverted duty refund under Rule 89(5).
- Exporters ship under LUT (Form GST RFD-11) and claim back credit under Rule 89(4). Handmade carpets can go to other States without registration within the limit (Notification 3/2018-IT).
- Income tax: Section 44AD deems 6% of digital and 8% of cash receipts as profit, up to Rs 2 crore of turnover (Rs 3 crore if cash is within 5%).
What is the GST rate on carpets and durries in 2026? 5%. All carpets and other textile floor coverings of Chapter 57, from hand-knotted woollen carpets (5701) to tufted carpets and turf (5703) and handloom cotton durries (5702, 5705), are in Schedule I (2.5% CGST plus 2.5% SGST) of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. Carpet job work is also 5%.
Carpet businesses rarely sit in one box. A Bhadohi exporter buys wool yarn, sends it to village looms, has the woven carpets washed and clipped by another unit, then ships most of them abroad. A durrie weaving family near Warangal may sell its own durries to shops in other States and also weave on piece rates for a trader. Each of those steps has its own GST rule, and the exporter's refund depends on getting all of them right. This guide is for carpet, rug and durrie makers, exporters, job weavers and the CAs who keep their books. It uses 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.
Carpet GST rate and HSN code by type
The headings in Chapter 57 go by how the carpet is made: knotted, woven, tufted, felt or anything else. All of them are at 5%.
Comparison
GST on Carpets, Rugs and Durries from 22 September 2025
| Product (HSN) | GST | Notification 9/2025-CT(R) entry |
|---|---|---|
| Knotted carpets and floor coverings, including hand-knotted woollen and silk carpets (5701) | 5% | Schedule I, S. No. 358 |
| Woven carpets, not tufted or flocked, including kelem, schumacks, karamanie and similar hand-woven rugs (5702) | 5% | Schedule I, S. No. 359 |
| Tufted carpets and floor coverings, including turf (5703) | 5% | Schedule I, S. No. 360 |
| Felt carpets and floor coverings, not tufted or flocked (5704) | 5% | Schedule I, S. No. 361 |
| Other floor coverings, bath mats where cotton predominates, cotton handloom rugs (5705) | 5% | Schedule I, S. No. 362 |
| Coir mats, matting, floor coverings and handloom durries (5702, 5703, 5705) | 5% | Schedule I, S. No. 363 |
Source: Notification 9/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025. IGST on inter-State sales is the same 5%.
Two points come up often:
- Hand-made doesn't change the rate. A Rs 3 lakh hand-knotted silk carpet and a Rs 2,000 machine-tufted rug are both 5%. Hand-making matters for inter-State registration (covered below), not for the rate.
- Artificial turf is in 5703. Sports and landscaping turf is named in the tufted carpet entry, so it's 5% too.
Your main inputs aren't all at 5%. Wool yarn (5106 to 5110, S. No. 329), jute and other vegetable fibre yarn (5305 to 5308, S. No. 338) and man-made staple fibre yarn (5509 to 5511, S. No. 347) are 5% under Schedule I. Synthetic dyes (3204, Schedule II S. No. 46) and synthetic latex used for tufted carpet backing (4002, S. No. 128) are 18%. Looms (8446, S. No. 433) and tufting machines (8447, S. No. 434) are 18% as well. That gap is where refunds come from.
GST on carpet weaving, washing and finishing job work
Most carpets pass through several hands before they're sold. When you weave, wash, clip or bind a carpet whose yarn belongs to someone else, you're supplying a service. From 22 September 2025, job work "in relation to textiles and textile products falling under Chapters 50 to 63" is 2.5% CGST plus 2.5% SGST, so 5% (Notification 11/2017-CT(R), S. No. 26(ii)(g), as substituted by Notification 15/2025-CT(R)). Carpets are Chapter 57, so the 5% covers the whole chain.
A job weaver uses the Rs 20 lakh registration limit under Section 22(1) of the CGST Act. The Rs 40 lakh limit is only for suppliers "engaged exclusively in the supply of goods", and weaving charges are a service. Below Rs 20 lakh of yearly charges, the weaver doesn't register and charges no GST.
Example: a washing and finishing unit in Mirzapur earns Rs 30,00,000 of job work charges in FY 2026-27 from three exporters. It must register and charge 5%, which is Rs 1,50,000 for the year. The exporters take that as credit.
If you're a registered exporter sending yarn to looms, Section 143 lets it go out under a delivery challan without GST, as long as the carpet comes back within one year. You file ITC-04 yearly (half-yearly above Rs 5 crore turnover) under Rule 45(3). Our job work guide has the step-by-step challan process.
Inverted duty refund for carpet makers
A domestic carpet maker pays 18% on dyes and latex and 5% on yarn, but collects only 5% on sales. Credit builds up. Notification 5/2017-CT(R) bars refunds for listed goods, but its table (with later amendments up to 20/2023-CT(R)) covers woven and knitted fabrics, corduroy, narrow fabrics, nets, imitation zari, edible oils, coal and railway goods. Chapter 57 isn't on it. So you can claim the refund under Section 54(3) of the CGST Act.
Rule 89(5) of the CGST Rules sets the formula. "Net ITC" here means credit on inputs only, so job work charges, freight and machinery don't count.
Step-by-Step Guide
Rule 89(5) Inverted Refund: Tufted Carpet Unit, One Quarter
Turnover and tax
Domestic carpet sales Rs 50,00,000 at 5%. Tax payable on this inverted supply: Rs 2,50,000. Adjusted total turnover: Rs 50,00,000.
Credit on inputs (Net ITC)
Yarn Rs 30,00,000 at 5% = Rs 1,50,000. Dyes and latex Rs 10,00,000 at 18% = Rs 1,80,000. Net ITC = Rs 3,30,000.
Credit on input services
Washing job work and freight carry Rs 20,000 of GST. Total ITC on inputs and input services = Rs 3,50,000.
First part of the formula
Rs 50,00,000 x Rs 3,30,000 / Rs 50,00,000 = Rs 3,30,000.
Second part of the formula
Rs 2,50,000 x (Rs 3,30,000 / Rs 3,50,000) = Rs 2,35,714.
Maximum refund
Rs 3,30,000 minus Rs 2,35,714 = Rs 94,286. File Form GST RFD-01 within two years of the end of the relevant period (Section 54(1)).
Source: CGST Act 2017, Section 54(3); Rule 89(5), CGST Rules 2017; Notification 5/2017-CT(R) as amended; rates from Notification 9/2025-CT(R)
The refund is only for credit that has actually piled up. If your electronic credit ledger is already being used up each month, there's nothing to claim. Our inverted duty refund guide explains the filing.
Exporting carpets: LUT and refund of credit
Export is a zero-rated supply under Section 16(1) of the IGST Act. Most carpet exporters ship under a Letter of Undertaking instead of paying IGST:
Step-by-Step Guide
Carpet Export Under LUT
File the LUT first
Furnish a Letter of Undertaking in Form GST RFD-11 on the GST portal before you export (Rule 96A(1), CGST Rules). Renew it every financial year.
Invoice without IGST
Goods must leave India within three months of the export invoice, or the Commissioner's extended period. If they don't, pay the tax with interest within 15 days (Rule 96A(1)(a)).
Report in GSTR-1
Export invoice details flow from GSTR-1 to Customs, which confirms the goods left India (Rule 96A(2)).
Claim the refund
Rule 89(4): (Turnover of zero-rated supply x Net ITC) / Adjusted total turnover. Here Net ITC covers inputs and input services.
Watch the foreign exchange
If export proceeds aren't realised within the FEMA period, the refund must be paid back with interest (proviso to Section 16(3), IGST Act).
Source: IGST Act 2017, Section 16; CGST Act Section 54; CGST Rules 89(4) and 96A
Example: in a quarter, an exporter ships Rs 80,00,000 of hand-knotted carpets under LUT and sells Rs 20,00,000 in India. Credit on yarn, dyes, job work and freight is Rs 4,00,000. Refund = Rs 80,00,000 x Rs 4,00,000 / Rs 1,00,00,000 = Rs 3,20,000. Our LUT and RFD-01 guide and export of goods guide cover the portal steps.
Registration and selling to other States
A maker who only sells carpets registers above Rs 40 lakh in most States, or Rs 20 lakh in States outside Notification 10/2019-Central Tax, which includes Telangana. Our registration limit guide lists the States.
Section 24(i) normally makes any inter-State sale a reason to register. Handmade carpets have an exemption. The table in Notification 3/2018-Integrated Tax lists "Carpet, rugs and durries" under Chapter 57 at S. No. 12, for supplies "made by the craftsmen predominantly by hand even though some machinery may also be used". The relief holds only while the all-India value of such supplies stays within the Section 22(1) limit. You still need a PAN and an e-way bill for every such consignment, whatever its value (para 2 of the notification and the proviso to Rule 138(1)). A power-loom or tufting-gun unit isn't covered and must register before its first inter-State sale.
Exporters should register even when small. Without a GSTIN you can't file an LUT or claim a refund. Our GST registration service files the application.
Income tax: TDS on weaver payments and Section 44AD
TDS you deduct. When your firm or company gives yarn to weavers and pays them per carpet, that's "work" under a contract. For FY 2025-26 it's Section 194C of the 1961 Act; from 1 April 2026 it's Section 393(1), Table Sl. No. 6(i) of the 2025 Act. The rate is 1% for an individual or HUF weaver and 2% for others, once one bill exceeds Rs 30,000 or the year's payments exceed Rs 1,00,000. Say your firm pays a weaving family Rs 1,20,000 in the year through bills of Rs 20,000 each. No single bill crosses Rs 30,000, but the year's total crosses Rs 1,00,000, so 1% TDS applies to the payments. On the full Rs 1,20,000 that's Rs 1,200. Our contractor TDS guide and TDS filing service handle the quarterly returns.
Section 44AD. A resident individual, HUF or partnership firm (not an LLP) can declare presumptive profit for FY 2025-26:
Comparison
Section 44AD for a Carpet Business (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 |
| Depreciation on looms | Not separately allowed; treated as already deducted (Section 44AD(2)) |
| 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, Table Sl. No. 1, same rates and limits |
Source: Income-tax Act 1961, Section 44AD; Income-tax Act 2025, Section 58
Example: a durrie maker (proprietor) has turnover of Rs 90,00,000, with Rs 75,00,000 received by bank and Rs 15,00,000 in cash. Deemed profit is 6% of Rs 75 lakh (Rs 4,50,000) plus 8% of Rs 15 lakh (Rs 1,20,000), so Rs 5,70,000. Under the new regime for FY 2025-26, tax is 5% of the slice from Rs 4 lakh to Rs 5.7 lakh, which is Rs 8,500. Total income is within Rs 12 lakh, so the Section 87A rebate cancels it, leaving no tax. The return must still be filed because income is above Rs 4 lakh. See our Section 44AD guide.
Common mistakes carpet businesses make
- Charging 12% or 18% on machine-made carpets. Every Chapter 57 heading is 5% from 22 September 2025.
- Billing job work at 18%. Weaving, washing and finishing on carpets owned by someone else are textile job work at 5%.
- Missing the inverted refund. Carpets aren't on the 5/2017-CT(R) bar list. A unit buying 18% dyes and latex may be leaving credit stuck.
- Counting job work credit in the inverted refund. Rule 89(5) uses credit on inputs only. Job work and freight credit count only in the export formula under Rule 89(4).
- Exporting before filing the year's LUT. Without an LUT on file, you can't ship without IGST.
- Sending a machine-made rug to another State unregistered. The 3/2018-IT exemption is only for carpets made predominantly by hand.
How Tax Garden helps carpet makers and exporters
We check which rate, limit and exemption apply to each part of your business: own carpets, job work, inter-State sales or exports. Our GST return filing service files GSTR-1, GSTR-3B, ITC-04 and your LUT, and works out the Rule 89(4) or 89(5) refund before we file RFD-01. On the income tax side we handle TDS on weaver payments and compare Section 44AD with your actual profit before filing your return through our ITR filing service. For weaving families, our handloom weavers guide covers sarees and fabric. Call or WhatsApp us on 9640290977.
