Looking for expert help with Income tax and GST for gift shop owners 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
- A gift shop has no single GST rate. Candles, ceramic mugs, statuettes of wood, stone, ceramic or base metal, board games and paper gift boxes are 5%; perfume, clocks, greeting cards, artificial flowers and glassware are 18%; imitation jewellery and silver articles are 3% (Notification 9/2025-Central Tax (Rate)).
- Listed handicrafts, such as handmade wooden frames, brass art ware and glass art ware, are 5% under Notification 13/2025-Central Tax (Rate), from 22 September 2025. The machine-made versions of some of these are 18%.
- A hamper sold at one price is taxed at the highest rate inside it (Section 8(b), CGST Act). Pricing items separately keeps each at its own rate.
- Composition at 1% often suits gift shops, since companies can't claim input tax credit on goods they give as gifts (Section 17(5)(h)).
- Section 44AD deems 6% profit on digital receipts and 8% on cash for AY 2026-27.
What is the GST rate on gift items in India? Each gift item is taxed by its own HSN code, from 22 September 2025. Candles, ceramic mugs, statuettes, board games and paper gift boxes are 5%. Perfumes, clocks, watches, greeting cards, artificial flowers and glassware are 18%. Imitation jewellery and silver articles are 3%. Listed handicrafts are 5% under Notification 13/2025-Central Tax (Rate).
A gift shop sells more tax rates across one counter than almost any other retailer. A brass Ganesha, a scented candle, a perfume and a greeting card can go into one bag, and they carry three different rates. Get the item codes right in your billing software once, and most of your GST work falls into place. Get them wrong and every bill in the festive season is wrong. This guide covers the GST rates, hamper billing, the composition choice and your AY 2026-27 income tax return. If you mainly sell toys or cosmetics, our toy shop and cosmetics shop guides fit better.
Which GST rate applies to each gift item?
The September 2025 rate changes moved a lot of decorative stock to 5%. Anything not listed in another schedule falls in the 18% residual entry (Notification 9/2025-Central Tax (Rate), Schedule II, S. No. 639).
Comparison
GST Rates on Common Gift Shop Items (from 22 September 2025)
| Item | HSN | GST rate |
|---|---|---|
| Candles | 3406 | 5% |
| Statuettes and ornaments of wood; wooden jewellery boxes | 4420 | 5% |
| Statuettes and ornaments of stone | 6802 | 5% |
| Ceramic statues and ornaments | 6913 | 5% |
| Ceramic mugs, plates and other tableware | 6911, 6912 | 5% |
| Bells, statuettes, idols and photo frames of base metal (brass, copper, iron) | 8306 | 5% |
| Basketware and wickerwork | 4601, 4602 | 5% |
| Board games and playing cards | 9504 | 5% |
| Paper and paperboard gift boxes and cartons | 4819 10, 4819 20 | 5% |
| Hand paintings | 9701 | 5% |
| Agarbatti and dhoop | 3307 41 00 | 5% |
| Imitation jewellery | 7117 | 3% |
| Silver and gold articles and jewellery | 7113, 7114 | 3% |
| Perfumes and deodorants | 3303, 3307 | 18% |
| Greeting cards | 4909 | 18% |
| Wooden photo frames (not handicraft) | 4414 | 18% |
| Artificial flowers | 6702 | 18% |
| Glassware for table or decoration | 7013 | 18% |
| Glass mirrors (not handicraft) | 7009 | 18% |
| Handbags, wallets, purses (other than cotton or jute) | 4202 | 18% |
| Plastic gift articles; plastic bottles and tableware | 3926, 3924 | 18% |
| Clocks and wrist watches | 9105, 9102 | 18% |
| Decorative lights and lamps (not handcrafted) | 9405 | 18% |
| Festive and party articles | 9505 | 18% |
Source: Notification 9/2025-Central Tax (Rate): Schedule I S. No. 250, 253, 305, 311, 322, 401, 403-405, 420, 498, 508; Schedule II S. No. 60, 64, 125, 127, 145, 161, 193, 214, 249, 252, 584, 587, 614, 618; Schedule IV S. No. 10, 11, 14
Two things catch shop owners out. Cotton and jute handbags (4202 22 20 and 4202 22 30) are 5%, while other handbags are 18%. And a wax figurine is 18% as a carved wax article (9602) unless it's handcrafted, while a candle of the same wax is 5%.
Do handicraft items get a lower rate?
Yes. A separate notification sets concessional rates for listed handicrafts. Notification 13/2025-Central Tax (Rate) replaced the table in Notification 21/2018-Central Tax (Rate) from 22 September 2025, and most entries are now 5%. The GST Council's 56th meeting release describes this as a cut from 12% to 5%.
For a gift shop, the entries that matter most are:
Comparison
Handicraft Items at Concessional Rates (Notification 13/2025-CT(R))
| Handicraft item | HSN | GST rate |
|---|---|---|
| Handcrafted candles | 3406 | 5% |
| Handbags, pouches, purses and jewellery boxes | 4202 22, 4202 29, 4202 31, 4202 32, 4202 39 | 5% |
| Wooden frames for paintings, photographs and mirrors | 4414 | 5% |
| Carved wood products and decorative articles of wood | 4416, 4421 99 90 | 5% |
| Articles of paper mache | 4823 | 5% |
| Hand-embroidered articles; handmade shawls | 5810, 6117, 6214 | 5% |
| Ornamental framed mirrors | 7009 92 00 | 5% |
| Glass statues and glass art ware (vases, jars, votives) | 7018 90 10, 7020 00 90 | 5% |
| Art ware of iron, brass, copper and aluminium | 7326 90 99, 7419 80, 7616 99 90 | 5% |
| Handcrafted lamps, including Panchloga lamps | 9405 10 | 5% |
| Dolls and toys of wood, metal or textile (Channapatna, Thanjavur) | 9503 | 5% |
| Articles of wax, lac and shellac | 9602 | 5% |
| Silver filigree work | 7113 11 10 | 3% |
| Handmade imitation jewellery | 7117 | 3% |
Source: Notification 13/2025-Central Tax (Rate), dated 17-9-2025, S. No. 1-4, 9, 16, 17, 22, 24, 25, 26-30, 32, 34, 37
The concession is for handicrafts, not for every item under the same code. A factory-made photo frame of wood is still 18% under the main notification. Ask your supplier to show the rate and the notification on the purchase bill, and bill it out at the same rate. If a supplier wrongly charges 5% on a machine-made item, your own sale of it at 5% is short-paid too.
How do you bill a gift hamper?
The CGST Act's own example of a mixed supply is a gift pack: canned food, sweets, chocolates, dry fruits and drinks sold together for one price (Section 2(74), illustration). Each item could be sold alone, so it isn't a composite supply with a principal item. Section 8(b) taxes a mixed supply at the highest rate of any item in it.
Here's a Rs 1,500 Diwali hamper with a ceramic mug, a candle and a perfume:
Comparison
Rs 1,500 Hamper: One Price vs Itemised Bill
| Item | Sold at one price | Priced separately |
|---|---|---|
| Ceramic mug (5%) | Part of Rs 1,500 taxed at 18% | Rs 400 incl. GST; GST Rs 19.05 |
| Candle (5%) | Part of Rs 1,500 taxed at 18% | Rs 300 incl. GST; GST Rs 14.29 |
| Perfume (18%) | Part of Rs 1,500 taxed at 18% | Rs 800 incl. GST; GST Rs 122.03 |
| GST in the Rs 1,500 | Rs 1,500 x 18/118 = Rs 228.81 | Rs 155.37 |
Source: Sections 2(74) and 8(b), CGST Act 2017; rates from Notification 9/2025-Central Tax (Rate). Figures are illustrative.
On one hamper that's Rs 73.44 more GST out of the same Rs 1,500. On 500 corporate hampers in October, it's about Rs 36,700. Show each item with its own price and HSN on the invoice when the customer agrees to buy them that way. Don't split the price on paper while selling a sealed hamper at one price; the tax follows how the supply is actually made.
When do you need GST registration?
If you only sell goods, registration is required once aggregate turnover crosses Rs 40 lakh in most states. Telangana and several other states kept the Rs 20 lakh limit (Notification 10/2019-Central Tax), so a Hyderabad gift shop with Rs 22 lakh of sales must register.
Online orders change this. A single sale shipped to a buyer in another state needs registration from the first rupee (Section 24(i), CGST Act). If you sell on Instagram or your own website and courier across India, register before the first out-of-state order. The one exception is a seller whose out-of-state sales are only handicraft goods (as defined in Notification 21/2018-Central Tax (Rate)): below the normal turnover limit, registration isn't needed if you have a PAN and generate e-way bills (Notification 3/2018-Integrated Tax). Ship one perfume or factory-made frame across a state line and the exception is gone. See our GST registration service.
Regular scheme or composition?
Under composition, a trader pays 1% of turnover (0.5% CGST plus 0.5% SGST, Rule 7, CGST Rules), up to Rs 1.5 crore turnover. You issue a bill of supply without GST, claim no input tax credit (ITC), and can't sell to other states (Section 10(2)(c), CGST Act).
For a hardware shop, losing contractor customers is the big cost of composition. A gift shop has less to lose. A company buying hampers to give away can't claim ITC on them anyway, because Section 17(5)(h) blocks ITC on goods disposed of by way of gift. So your composition bill costs that buyer nothing.
The test is simple if your shelf prices stay the same either way. Work out your net GST for a normal month under the regular scheme (tax on sales minus ITC on purchases). If that's more than 1% of your GST-inclusive sales, composition leaves you more money.
Comparison
One Month, Rs 4.46 Lakh of Sales (Half 5% Stock, Half 18%)
| Item | Regular scheme | Composition (trader) |
|---|---|---|
| Sales before GST | Rs 2,00,000 at 5% + Rs 2,00,000 at 18% | Same shelf prices |
| GST-inclusive sales | Rs 4,46,000 | Rs 4,46,000 |
| Tax on sales | Rs 10,000 + Rs 36,000 = Rs 46,000 | 1% x Rs 4,46,000 = Rs 4,460 |
| Stock bought: Rs 1,20,000 at 5% + Rs 1,20,000 at 18% | ITC Rs 6,000 + Rs 21,600 = Rs 27,600 | Rs 27,600 becomes cost |
| GST paid in cash | Rs 46,000 - Rs 27,600 = Rs 18,400 | Rs 4,460 |
| Left after stock and GST | Rs 4,46,000 - Rs 2,67,600 - Rs 18,400 = Rs 1,60,000 | Rs 4,46,000 - Rs 2,67,600 - Rs 4,460 = Rs 1,73,940 |
Source: Rule 7, CGST Rules 2017; Section 10, CGST Act 2017; Notification 9/2025-Central Tax (Rate). Figures are illustrative.
This shop keeps Rs 13,940 more a month on composition, because its Rs 18,400 net GST is well above 1% of sales (Rs 4,460). A shop with thin margins and mostly 5% stock can land on the other side, so run the numbers on your own GSTR-3B. Composition doesn't fit if you ship orders to other states. Our composition scheme guide covers the other conditions.
How is your income taxed for AY 2026-27?
Step-by-Step Guide
Choosing How to Report Gift Shop Income
Check Section 44AD eligibility
Resident individual, HUF or partnership firm (not LLP). Turnover up to Rs 2 crore, or up to Rs 3 crore if cash receipts are within 5% of total receipts.
Split receipts by mode
UPI, card, cheque and bank receipts count at 6%. Cash receipts count at 8%.
Compare with your real profit
If your books show less than the deemed profit, declaring actual profit may cost less tax, but brings books and audit duties.
Check the audit limit
Section 44AB audit applies above Rs 1 crore turnover, or Rs 10 crore if cash receipts and cash payments are each within 5%.
File the right form
ITR-4 for Section 44AD if total income is within Rs 50 lakh and other conditions are met; ITR-3 if you keep full books.
Source: Sections 44AD, 44AB and 87A, Income-tax Act 1961; Finance Act 2025
Example 1 (neighbourhood gift shop, new regime): Turnover Rs 90 lakh, of which Rs 72 lakh by UPI and card and Rs 18 lakh in cash. Cash is 20% of receipts, so the Rs 2 crore limit applies, and the shop is within it.
- Deemed profit: 6% of Rs 72 lakh (Rs 4,32,000) plus 8% of Rs 18 lakh (Rs 1,44,000), so Rs 5,76,000.
- Tax: 5% on the Rs 1,76,000 above Rs 4 lakh is Rs 8,800.
- The Section 87A rebate (income up to Rs 12 lakh) wipes it out. Tax payable: nil.
Example 2 (corporate gifting store, new regime): Turnover Rs 2.4 crore, with Rs 7.2 lakh (3%) received in cash. Cash is within 5%, so the Rs 3 crore limit applies.
- Deemed profit: 6% of Rs 2,32,80,000 = Rs 13,96,800, plus 8% of Rs 7,20,000 = Rs 57,600. Total Rs 14,54,400.
- Tax: nil up to Rs 4 lakh, Rs 20,000 on Rs 4-8 lakh, Rs 40,000 on Rs 8-12 lakh, and 15% of Rs 2,54,400 = Rs 38,160. Total Rs 98,160.
- No 87A rebate, as income is above Rs 12 lakh. Add 4% cess of Rs 3,926. Tax payable: Rs 1,02,090.
Gift shops earn most of their year in a few weeks around Diwali, Rakhi and weddings. That makes advance tax easy to miss. If you use Section 44AD, the whole year's advance tax is due by 15 March (Section 211(1)(b)). See our Section 44AD guide and old vs new regime guide.
Common mistakes gift shops make
- One GST rate for the whole shop. Billing everything at 18% overcharges customers on 5% stock. Billing everything at 5% underpays tax on perfume, clocks and cards. Map every item code once.
- Taking the handicraft rate on factory goods. The 5% handicraft entries don't cover machine-made frames or mirrors. Match your sale rate to the supplier's bill.
- Pricing hampers without checking the contents. One 18% item inside makes the whole one-price hamper 18%.
- Shipping one order out of state while on composition. Inter-state sales aren't allowed under composition, and without registration they aren't allowed at all.
- Taking Rs 2 lakh or more in cash for one corporate order. Receiving Rs 2 lakh or more in cash from one person for one transaction breaks Section 269ST. See our cash transaction limits guide.
How Tax Garden helps gift shops
We set up item-wise GST rates for gift and handicraft stock, file GSTR-1 and GSTR-3B, and check each year whether composition still suits your sales mix. See our GST return filing service. We also prepare your ITR and compare Section 44AD with your actual profit; see our ITR filing service and pricing.
