Looking for expert help with Income tax and GST for cashew processing units 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
- Raw cashew in shell bought from a farmer is under reverse charge. The registered processor pays 5% GST in cash, then takes it back as credit (Notification 4/2017-Central Tax (Rate), S. No. 1).
- Raw nuts, whole and broken kernels, and roasted or salted cashews are all 5% (Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 22 and 132).
- Processing someone else's nuts is 5% job work only if the owner is GST-registered. For an unregistered owner, the entry points to 18%.
- Exported kernels are zero-rated. Under a Letter of Undertaking (LUT) you pay no IGST and can claim a refund of the unused credit, including the reverse charge you paid on raw nuts (Section 16(3), IGST Act).
- Audited units: the AY 2026-27 audit report was due 21 October 2026 and the ITR is due 21 November 2026 (CBDT Circular 07/2026).
Who pays GST on raw cashew bought from farmers? The buyer pays. Cashew nuts, not shelled or peeled (heading 0801), supplied by an agriculturist to a registered person are taxed under reverse charge at 5% (2.5% CGST plus 2.5% SGST), under S. No. 1 of Notification 4/2017-Central Tax (Rate), in force since 1 July 2017. The farmer doesn't need to register and doesn't charge GST.
Raw cashew is one of the few farm products that has been on the reverse charge list since GST started. That single entry shapes the whole compliance picture for a processing unit. You buy from growers who never issue a bill, you pay tax on their behalf, and you sell kernels to traders, packers or overseas buyers who want clean invoices. This guide is for owners of cashew processing units, cashew traders and the CAs who audit them. 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 2025 Act section numbers that apply from 1 April 2026.
What GST do you pay when you buy raw cashew from farmers?
You pay it, not the farmer. S. No. 1 of Notification 4/2017-Central Tax (Rate) lists "Cashew nuts, not shelled or peeled" under heading 0801, with "Agriculturist" as the supplier and "Any registered person" as the recipient. The rate comes from S. No. 22 of Schedule I of Notification 9/2025-Central Tax (Rate): 2.5% CGST plus 2.5% SGST. If the farmer is in another State, S. No. 1 of Notification 4/2017-Integrated Tax (Rate) applies instead and you pay 5% IGST.
Here's what that means in practice:
- The farmer stays out of GST. An agriculturist isn't liable to register for supplies of produce from cultivating land (Section 23(1)(b), CGST Act).
- You raise the paperwork. Issue a self-invoice for raw nuts received from an unregistered farmer within 30 days of receipt (Section 31(3)(f) and Rule 47A, CGST Rules), and a payment voucher when you pay them (Section 31(3)(g)).
- You pay it in cash. The electronic credit ledger can be used only for output tax (Section 49(4)), and output tax excludes reverse charge tax (Section 2(82)). Once paid, the tax is input tax credit against your kernel sales.
Who counts as an agriculturist? Section 2(7) of the CGST Act limits it to an individual or Hindu Undivided Family who cultivates land, by own labour, family labour, or hired labour under personal supervision. A raw nut trader, a farmer producer company or a cooperative is not one, so S. No. 1 doesn't apply to their sales. If they're registered, they charge 5% on their own invoice.
Step-by-Step Guide
Buying Raw Cashew from a Farmer: GST Steps
Confirm the seller is the grower
S. No. 1 of Notification 4/2017-CT(R) applies only to an agriculturist: an individual or HUF who cultivates land (Section 2(7), CGST Act). Keep the farmer's name, village and plantation details on file.
Issue a self-invoice within 30 days
Raise a tax invoice on yourself for the raw nuts received (Section 31(3)(f), Rule 47A). Do it within 30 days of receipt, even in peak season.
Issue a payment voucher
Record each payment to the farmer with a payment voucher (Section 31(3)(g)).
Pay 5% reverse charge in cash
Report the purchase in GSTR-3B as an inward supply liable to reverse charge and pay 2.5% CGST plus 2.5% SGST (or 5% IGST for an inter-State farmer) from the electronic cash ledger (Sections 2(82), 49(4)).
Claim the credit back
Once paid, the same tax is input tax credit, set off against GST on kernel sales or refunded on exports.
Source: CGST Act 2017, Sections 2(7), 2(82), 23, 31, 49; Rule 47A, CGST Rules; Notification 4/2017-CT(R) and 4/2017-IT(R), S. No. 1
Example (April 2026, a unit in Andhra Pradesh): you buy raw cashew worth Rs 40,00,000 from local growers. Reverse charge at 5% is Rs 2,00,000 (Rs 1,00,000 CGST and Rs 1,00,000 SGST), paid in cash. In the same month you sell kernels worth Rs 30,00,000 to a packer in Karnataka (5% IGST, Rs 1,50,000) and Rs 6,00,000 to a local dry fruit wholesaler (5%, Rs 30,000). Output tax is Rs 1,80,000. Your Rs 2,00,000 reverse charge credit plus, say, Rs 25,000 credit on packing material and power covers it, and you carry Rs 45,000 forward.
The tax roughly washes out over the year. The cash doesn't. The harvest runs for a few months, and you pay 5% on every lot of raw nuts as you buy it, while the kernels are sold over the rest of the year. Plan working capital for the buying season, not just the purchase price.
Cashew GST rate and HSN code: raw nuts, kernels and roasted cashew
Every form of the cashew nut itself is 5%. Raw nuts in shell, whole kernels, splits and broken pieces all sit in one entry, and roasted or salted cashews have their own 5% entry.
Comparison
GST on Cashew Products from 22 September 2025
| Product (HSN) | GST | Notification entry |
|---|---|---|
| Raw cashew nuts in shell (0801) | 5% | 9/2025-CT(R), Schedule I, S. No. 22 |
| Cashew kernels, whole, split or broken (0801) | 5% | 9/2025-CT(R), Schedule I, S. No. 22 |
| Cashew nuts roasted, salted, or roasted and salted (2008) | 5% | 9/2025-CT(R), Schedule I, S. No. 132 |
| Raw cashew bought from an agriculturist | 5%, paid by the buyer | 4/2017-CT(R), S. No. 1 (reverse charge) |
| Raw cashew imported | 5% IGST at customs, plus customs duty | 9/2025-IT(R), Schedule I, S. No. 22 |
Source: Notification 9/2025-Central Tax (Rate) and 9/2025-Integrated Tax (Rate), 17 September 2025, in force 22 September 2025; Notification 4/2017-Central Tax (Rate), 28 June 2017. Notification 01/2026-Central Tax (Rate) amends only beverage entries, not these.
Three practical points:
- Shells and cashew nut shell liquid are separate products. The entries above cover the nut. Shells, shell cake and cashew nut shell liquid (CNSL) are classified on their own, so check their HSN with your CA before you bill them. Don't assume they follow the kernel's 5%.
- Imported raw nuts. If you import raw cashew, IGST at 5% is charged at customs and is creditable, but basic customs duty isn't. Your GST return filing should pick up the import IGST from the bill of entry, not from a supplier invoice.
- Registration. For a goods-only business the threshold is Rs 40 lakh in most States, but Rs 20 lakh for intra-State suppliers in Telangana and the other States excluded by Notification 10/2019-Central Tax, and Rs 10 lakh in Manipur, Mizoram, Nagaland and Tripura (Section 22(1)). Any inter-State sale requires registration regardless of turnover (Section 24(i)). Reverse charge on S. No. 1 applies only to a registered buyer, so an unregistered unit won't owe it, but it also can't claim credit, and kernel buyers usually want a GST invoice. Our GST registration limit guide has the State list.
Every consignment above Rs 50,000 needs an e-way bill before the truck leaves (Rule 138, CGST Rules). See our e-way bill guide, and our RCM guide for how reverse charge works in general.
Processing on job work: 5% or 18%?
Plenty of units shell, peel and grade nuts for a trader or exporter and bill only a processing charge. The rate depends on who owns the nuts.
From 22 September 2025, S. No. 26 of Notification 11/2017-Central Tax (Rate), as substituted by Notification 15/2025-Central Tax (Rate), puts job work in relation to "all food and food products falling under Chapters 1 to 22" at 2.5% CGST. Cashew nuts are in Chapter 8, so processing for a registered trader or exporter is 5% in all. But "job work" under Section 2(68) of the CGST Act means processing goods belonging to another registered person. When the owner isn't registered, the charge falls under item (vii), "treatment or process on goods belonging to another person", at 9% CGST, which is 18% in all.
Keep job work challans for nuts you receive and return. Our job work guide covers the challan and time-limit rules on the principal's side.
Exporting kernels: LUT and refund of credit
Exported kernels are a zero-rated supply (Section 16(1)(a), IGST Act), and you can claim credit for inputs used in it even though no tax is charged (Section 16(2)).
You have two routes under Section 16(3):
- Export under a Letter of Undertaking (LUT) without paying IGST, then claim a refund of the unutilised input tax credit. For a unit that buys raw nuts from farmers, most of that credit is the reverse charge it paid in cash.
- Pay IGST on the export and claim a refund of the IGST paid.
If export proceeds aren't realised within the time allowed under the Foreign Exchange Management Act, 1999, the refund has to be paid back with interest within 30 days after that time limit (proviso to Section 16(3)). Our export LUT and refund guide walks through the RFD-01 filing, and you'll also need an Import Export Code before the first shipment.
Income tax: presumptive tax, audit and the AY 2026-27 dates
A processing unit's profit is taxed as business income under the head "Profits and gains of business or profession". If the owner also has a cashew plantation, keep the farm's accounts separate from the unit's.
Presumptive tax suits small units. Section 44AD covers resident individuals, HUFs and partnership firms (not LLPs) with turnover up to Rs 2 crore, or Rs 3 crore if cash receipts don't exceed 5% of turnover. Deemed profit is 6% of turnover received through banking channels and 8% of the rest. A unit that declares profit under Section 44AD(1) doesn't need a tax audit (first proviso to Section 44AB).
Example (proprietor, FY 2025-26): turnover Rs 1,80,00,000, of which Rs 1,70,00,000 came by bank transfer and Rs 10,00,000 in cash. Cash receipts are 5.56% of turnover, above 5%, so the limit is Rs 2 crore, and Rs 1.8 crore is within it. Deemed profit is Rs 10,20,000 (6% of Rs 1,70,00,000) plus Rs 80,000 (8% of Rs 10,00,000), or Rs 11,00,000.
Above that, the audit limit depends on your cash payments, not just your sales. Under Section 44AB(a), a business with turnover above Rs 1 crore needs a tax audit. The limit rises to Rs 10 crore only if cash receipts and cash payments are each within 5% of the total.
Example (partnership firm, FY 2025-26): turnover Rs 6,00,00,000, all received by bank transfer. Total payments Rs 5,50,00,000, of which Rs 1,20,00,000 was cash to growers. Cash payments are 21.82% of total payments, above 5%. So the Rs 10 crore limit doesn't apply, and the firm needs a tax audit. Had it paid growers by bank or UPI and kept cash payments to Rs 13,00,000 (2.36%), the Rs 10 crore limit would have applied and no audit would be needed.
For AY 2026-27, CBDT Circular No. 07/2026 dated 28 September 2026 extended the due dates for audit cases:
Comparison
AY 2026-27 Due Dates for an Audited Cashew Unit
| Filing | Original date | Extended date |
|---|---|---|
| Tax audit report (Form 3CA/3CB with 3CD) | 30 September 2026 | 21 October 2026 |
| ITR for audit cases (Explanation 2(a) to Section 139(1)) | 31 October 2026 | 21 November 2026 |
Source: CBDT Circular No. 07/2026 dated 28 September 2026, incometax.gov.in Latest News
From FY 2026-27 the Income-tax Act 2025 applies. Presumptive tax moves to Section 58 and the audit limits to Section 63 (Table, S. No. 1), with the same rupee figures. Our Section 44AD guide and tax audit due date guide have the detail.
Cash to growers: what's allowed
Section 40A(3). An expense is disallowed where you pay one person more than Rs 10,000 in cash in a day. Rule 6DD(e) of the Income-tax Rules 1962 exempts payments for agricultural produce, or the products of horticulture, made to the cultivator, grower or producer. Rs 75,000 in cash to the grower of the nuts stays deductible. The same Rs 75,000 to a raw nut trader or an agent doesn't. Keep the grower's name, village and a signed receipt with each cash payment.
Section 269ST. No one may receive Rs 2 lakh or more in cash from one person in a day, for a single transaction, or for one event. That binds the grower when you pay them. A Rs 2,40,000 lot can't be settled in cash in one go, and splitting it across days doesn't help when it's one transaction. See our cash limits guide.
Rule 6DD(e) saves the deduction, but it doesn't take the cash out of the 5% payment test in Section 44AB. That's the trap in the firm example above.
Common mistakes cashew processors make
- Treating farmer purchases as tax-free. The grower charges nothing, but the registered unit owes 5% under reverse charge on every lot. Skip it and the tax falls due later with interest, and the credit you'd have used against kernel sales wasn't taken in time.
- Paying reverse charge from the credit ledger. Reverse charge tax must go from the cash ledger (Sections 49(4) and 2(82)).
- Applying S. No. 1 to traders and FPOs. Only an individual or HUF who cultivates land is an agriculturist. Purchases from a registered trader come with their own 5% invoice.
- Billing an unregistered owner's processing at 5%. The 5% job-work rate needs a registered owner. Otherwise the entry points to 18%.
- Leaving export refunds unclaimed. Units that export under LUT build up reverse charge credit they can't use at home. Claim the refund instead of letting it sit in the ledger.
How Tax Garden helps cashew processing units
We issue raw nut self-invoices on time, pay reverse charge from the cash ledger and set the credit against kernel sales or claim it back on exports through our GST return filing service. At year end we prepare the books, run the cash tests, complete the tax audit and file the return through our ITR filing service. Setting up a new unit? Our GST registration service gets you registered before the first lot of raw nuts arrives. Related reading: our guides for dry fruit traders who buy your kernels and cotton ginning mills, which face the same farmer reverse charge.
