Looking for expert help with GST and income tax for coir product makers and exporters 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
- Coconut coir fibre (5305) is nil GST under Notification 10/2025-CT(R), S. No. 147. It isn't on the reverse charge list, so a unit buying fibre pays no GST on it.
- Coir yarn, coir rope, coir mats and other coir products are 5% from 22 September 2025 (Notification 9/2025-CT(R), Schedule I, S. Nos. 338, 355, 357 and 363). Coir mattresses are the exception at 18%.
- Coir pith compost is 5% in retail packs of up to 25 kg and nil in bulk.
- A unit selling both nil fibre and 5% products reverses part of its common input credit under Rule 42 every month.
- Exporters can ship under LUT without IGST. Big domestic buyers deduct 0.1% TDS on purchases above Rs 50 lakh a year.
What is the GST rate on coir products? Coir fibre is nil-rated. Coir yarn, coir rope, coir mats, matting and other coir articles are 5% under Schedule I of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. Coir pith compost is 5% only when pre-packaged and labelled. Coir mattresses are 18%.
A coir business usually sits at one link of a long chain. A defibring unit near Pollachi buys coconut husk from growers and sells brown fibre and coir pith. A spinning unit in Alappuzha twists that fibre into yarn. A mat weaver buys the yarn, dyes it and weaves doormats for retailers, and an exporter compresses pith into blocks for nurseries abroad. Each link has a different GST rate, a different input credit position and different income tax rules. 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.
Coir product GST rates by HSN code
Everything from yarn onward is 5%. Only the raw fibre and bulk pith compost are nil, and coir mattresses are the one item at 18%.
Comparison
GST on Coir and Coir Products from 22 September 2025
| Product (HSN) | GST | Entry |
|---|---|---|
| Coconut coir fibre (5305) | Nil | Notification 10/2025-CT(R), S. No. 147 |
| Coir pith compost, not pre-packaged and labelled (Chapter 53) | Nil | Notification 10/2025-CT(R), S. No. 148 |
| Coir yarn and other goods of 5305 to 5308 (except coir fibre) | 5% | 9/2025-CT(R) Schedule I, S. No. 338 |
| Coir pith compost, pre-packaged and labelled | 5% | Schedule I, S. No. 338 |
| Woven fabrics of vegetable textile fibres (5309 to 5311) | 5% | Schedule I, S. No. 339 |
| Coir cordage and ropes (5607) | 5% | Schedule I, S. No. 355 |
| Knotted netting of twine or rope (5608) | 5% | Schedule I, S. No. 356 |
| Products of coir (5609) | 5% | Schedule I, S. No. 357 |
| Coir mats, matting and floor coverings (5702, 5703, 5705) | 5% | Schedule I, S. No. 363 |
| Coir pillows, cushions and other coir bedding (9404) | 5% | Schedule I, S. No. 491 |
| Coir mattresses (9404) | 18% | Schedule II, S. No. 613 |
Source: Notifications 9/2025 and 10/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025. No coir entry was changed by the 2026 rate notifications. IGST on inter-State sales is the same rate.
Three points cause most of the confusion:
- Fibre is nil, yarn isn't. S. No. 338 covers "All goods [other than coconut coir fibre]" of 5305 to 5308. The moment fibre is spun into yarn, it moves to 5%.
- Pith compost turns on the pack, not the product. "Pre-packaged and labelled" means a commodity meant for retail sale, in a pack of not more than 25 kg, that must carry declarations under the Legal Metrology Act 2009 (Explanation (ii) to Notification 9/2025-CT(R)). A 5 kg nursery pack is 5%. A 50 kg bulk bag sold to a farm is nil.
- Coir mattresses are 18%. The 5% entry for 9404 reads "Coir products (except coir mattresses)". Our mattress manufacturers guide covers bedding in detail.
Two coir items aren't named in the notifications. Compressed coco peat blocks (plain pith that hasn't been composted) and coir geotextiles depend on the Customs Tariff heading your goods fall in. Each candidate heading in the table above is 5%, but confirm the HSN with your CA before you bill a large order at nil.
GST on spinning, weaving and other coir job work
Much of the coir trade runs on job work. A mat exporter hands yarn to a weaving shed and pays per mat. A trader sends fibre to a spinner and pays per kilo of yarn.
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)). Coir yarn, rope and mats all fall in Chapters 53, 56 and 57. Job work on "handicraft goods" gets the same 5% under item (j).
There's a condition hidden in the definition. "Job work" in Section 2(68) of the CGST Act means a treatment or process on goods "belonging to another registered person". If the owner of the yarn is unregistered, your weaving charge is a "treatment or process on goods belonging to another person" under item (vii), at 18%. Check your principal's GSTIN before you bill.
A job worker supplies a service, so registration kicks in at Rs 20 lakh of turnover under Section 22(1). The Rs 40 lakh limit applies only to those "engaged exclusively in the supply of goods". Our job work guide covers delivery challans and ITC-04.
Selling nil fibre and 5% products: Rule 42 reversal
Most coir units sell something nil-rated alongside their 5% goods: loose fibre, or bulk pith. A unit that sells only coir fibre is making wholly exempt supplies and doesn't need to register at all (Section 23(1)(a) of the CGST Act). Once you sell both, you register for the taxable part and split your input credit.
Credit on inputs used only for exempt supplies isn't available. Credit used for both, called common credit, is split each month under Rule 42 of the CGST Rules: the share for exempt supplies 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: Monthly GST for a Mixed Coir Unit
Sales for the month
A registered unit in Tamil Nadu sells coir yarn for Rs 6,00,000, coir mats for Rs 4,00,000 and 5 kg compost packs for Rs 1,00,000, all at 5%. It also sells loose fibre for Rs 3,00,000 and bulk compost for Rs 2,00,000, both nil. Total turnover Rs 16,00,000.
Output tax
5% of Rs 11,00,000 = Rs 55,000 (Rs 27,500 CGST plus Rs 27,500 SGST). The Rs 5,00,000 of nil sales carry no tax.
Common credit
GST paid on machinery repairs, packing film and transport used for all products comes to Rs 24,000 for the month (C2).
Rule 42 reversal
Exempt share = Rs 5,00,000 ÷ Rs 16,00,000 = 31.25%. D1 = 31.25% x Rs 24,000 = Rs 7,500, reversed in GSTR-3B. Credit left: Rs 16,500.
Cash payable
Rs 55,000 less Rs 16,500 = Rs 38,500 paid in cash for the month.
Source: CGST Rules 2017, Rule 42 (read from taxinformation.cbic.gov.in); rates from Notifications 9/2025 and 10/2025-CT(R)
Our Rule 42 and 43 guide explains the annual true-up and the separate rule for capital goods.
Selling outside your State and exporting
Handmade coir goods and registration. Notification 3/2018-Integrated Tax exempts persons making inter-State supplies of handicraft goods from registering, as long as all-India aggregate turnover stays within the Section 22(1) limit. "Coir products (including mats, mattresses)" of 5705 and 9404 are at S. No. 15 of its table, and the exemption applies when they are "made by the craftsmen predominantly by hand even though some machinery may also be used in the process" (paragraph 1(ii)). You still need a PAN and an e-way bill for each consignment under Rule 138. Coir rope and other coir articles (5607, 5609) are covered through paragraph 1(i) only if they are "handicraft goods" under Notification 21/2018-CT(R): predominantly handmade, with visual appeal and features that set them apart from machine-made goods. Power-loom mats and coir yarn don't qualify, so the usual rule applies to them: anyone making inter-State taxable supplies must register (Section 24(i)).
Exports. Exports are zero-rated under Section 16 of the IGST Act. You can ship under a Letter of Undertaking (LUT) without paying IGST and claim a refund of unused input credit. Zero-rating applies even to nil-rated goods such as coir fibre, so a fibre exporter can still claim back GST on packing and freight services. Our export LUT and refund guide walks through the RFD-01 steps.
Income tax: TDS on purchases, cash for husk and Section 44AD
TDS on purchases (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. For FY 2025-26 it's Section 194Q of the 1961 Act. From 1 April 2026 it's Section 393(1), Table Sl. No. 8(ii) of the 2025 Act. Say an exporter buys Rs 75,00,000 of coir yarn from you in FY 2026-27. TDS is 0.1% of Rs 25,00,000, which is Rs 2,500. Our 194Q guide covers the buyer test.
Paying in cash for husk and hand-spun yarn. An expense paid in cash above Rs 10,000 to one person in a day is normally disallowed: Section 40A(3) of the 1961 Act, and Section 36(4) of the 2025 Act from 1 April 2026. Rule 26(1) of the Income-tax Rules 2026 (Rule 6DD of the 1962 Rules before that) lists exceptions. Two can matter to coir units:
- Clause (e): payments for agricultural produce or products of horticulture made "to the cultivator, grower or producer". Husk bought directly from the coconut grower can fall here. Cash paid to a husk trader doesn't.
- Clause (f): payments for products "manufactured or processed without the aid of power in a cottage industry, to the producer". This covers yarn bought from a household that spins by hand. Yarn from a motorised ratt is made with the aid of power, so it's outside this clause.
Pay by bank or UPI wherever you can. Our Section 40A(3) guide lists every exception.
Section 44AD for small units. A resident individual, HUF or partnership firm (not an LLP) can declare presumptive profit:
Comparison
Section 44AD for a Coir Unit (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 ratts, looms and defibring machines | Not allowed separately; 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, same rates and limits |
Source: Income-tax Act 1961, Section 44AD; Income-tax Act 2025, Section 58
Example: a proprietor weaving coir mats has FY 2025-26 turnover of Rs 1,80,00,000. Rs 1,74,00,000 came by bank and Rs 6,00,000 in cash. Deemed profit is 6% of Rs 1.74 crore (Rs 10,44,000) plus 8% of Rs 6 lakh (Rs 48,000), so Rs 10,92,000. Under the new regime, tax is nil up to Rs 4 lakh, Rs 20,000 on Rs 4 to 8 lakh and 10% of Rs 2,92,000 (Rs 29,200) above Rs 8 lakh, a total of Rs 49,200. Total income is within Rs 12 lakh, so the Section 87A rebate of up to Rs 60,000 brings the tax to nil, provided there's no other income. Our Section 44AD guide explains the opt-out rule.
Common mistakes coir businesses make
- Billing coir yarn at nil. Only coconut coir fibre is exempt. Yarn is 5% under S. No. 338.
- Charging 5% on bulk pith compost. Compost above 25 kg, or not meant for retail sale, isn't "pre-packaged and labelled", so it's nil.
- Billing coir mattresses at 5%. They're 18%; only other coir bedding is 5%.
- Charging 5% job work to an unregistered owner. The 5% job work rate needs a registered principal. Otherwise it's 18%.
- Skipping the Rule 42 reversal. Nil fibre and bulk compost sales are exempt turnover, and part of the common credit has to go back each month.
- Paying a husk trader in cash above Rs 10,000 a day. The produce exception covers only the grower.
How Tax Garden helps coir units
We map each of your products to the right entry (fibre, yarn, rope, mats, compost packs or mattresses), set up nil and 5% lines in your billing software and work out the Rule 42 reversal each month. Our GST return filing service files GSTR-1, GSTR-3B and ITC-04, and handles LUT renewal and export refunds. New units can start with GST registration. On the income tax side we compare Section 44AD with your books and file your return through our ITR filing service. Mat and rug weavers can also read our carpet and durrie makers guide, and the jute mills guide covers the other big vegetable fibre. Call or WhatsApp us on 9640290977.
