Looking for expert help with GST and income tax for grain and pulses wholesale traders 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
- Loose rice, wheat, millets and pulses (whole or split) carry nil GST (Notification 10/2025-Central Tax (Rate), in force from 22 September 2025).
- The same goods are 5% when pre-packaged and labelled: a retail pack of up to 25 kg that must carry Legal Metrology declarations (Notification 9/2025-Central Tax (Rate), Schedule I). Branding doesn't matter. A 50 kg bag stays nil.
- A trader dealing only in nil-rated loose grain doesn't need GST registration (Section 23(1)(a), CGST Act). Add packed lines and the loose sales count toward the threshold.
- If you sell both, credit on common costs like godown rent and transport must be partly reversed under Rule 42.
- Thin trading margins make 44AD's 6% deemed profit expensive. Cash paid to farmers can also pull you into a tax audit even below Rs 10 crore turnover.
What is the GST rate on rice, wheat and dal for traders? Loose, unlabelled rice, wheat, other cereals and pulses are nil-rated. Packs of up to 25 kg meant for retail sale that must carry Legal Metrology declarations are taxed at 5% (2.5% CGST plus 2.5% SGST). The rates come from Notifications 9/2025 and 10/2025-Central Tax (Rate), in force from 22 September 2025.
Most grain wholesalers run two businesses under one roof. One is the traditional trade in 50 kg and 75 kg sacks that carries no GST at all. The other is the 1 kg, 5 kg, 10 kg and 25 kg retail packs you fill for kirana stores and supermarkets, which carry 5%. The tax trouble almost always sits at the boundary between the two. This guide covers the GST rates, registration, credit reversal, mandi commission, and your income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 sections that apply from 1 April 2026.
What GST rate applies to grain, rice and pulses?
Nil or 5%, depending only on how the goods are packed. The rates below are from Notification 9/2025-Central Tax (Rate) (Schedule I, 2.5% central tax, so 5% in all) and Notification 10/2025-Central Tax (Rate) (nil), both dated 17 September 2025.
Comparison
GST on Cereals and Pulses: Loose vs Pre-Packaged and Labelled
| Goods | HSN | Loose / not labelled | Pre-packaged and labelled |
|---|---|---|---|
| Pulses (dried, shelled, whole or split dal) | 0713 | Nil (10/2025 S. No. 39) | 5% (9/2025 S. No. 20) |
| Wheat and meslin | 1001 | Nil (10/2025 S. No. 62) | 5% (9/2025 S. No. 43) |
| Maize (corn) | 1005 | Nil (10/2025 S. No. 66) | 5% (9/2025 S. No. 47) |
| Rice | 1006 | Nil (10/2025 S. No. 67) | 5% (9/2025 S. No. 48) |
| Jowar (grain sorghum) | 1007 | Nil (10/2025 S. No. 68) | 5% (9/2025 S. No. 49) |
| Bajra, ragi, millets | 1008 | Nil (10/2025 S. No. 69) | 5% (9/2025 S. No. 50) |
| Wheat flour (atta) | 1101 | Nil (10/2025 S. No. 70) | 5% (9/2025 S. No. 51) |
| Suji, dalia (cereal groats) | 1103 | Nil (10/2025 S. No. 72) | 5% (9/2025 S. No. 53) |
| Besan and other pulse flours | 1106 | Nil (10/2025 S. No. 75) | 5% (9/2025 S. No. 56) |
| Rice bran (other than de-oiled) | 2302 | 5% (9/2025 S. No. 155) | 5% (9/2025 S. No. 155) |
Source: Notification 9/2025-Central Tax (Rate), Schedule I, and Notification 10/2025-Central Tax (Rate), both dated 17 September 2025, in force from 22 September 2025
For inter-State sales, the same goods carry 5% IGST or nil under the matching Integrated Tax (Rate) notifications.
What counts as "pre-packaged and labelled"?
The Explanation to Notification 9/2025-Central Tax (Rate) defines it as commodities that are:
- intended for retail sale,
- containing not more than 25 kg (or 25 litre), and
- "pre-packed" under Section 2(l) of the Legal Metrology Act 2009, where the pack or its label is required to carry declarations under that Act and its rules.
So the test is not a brand. An unbranded 10 kg bag of sona masoori with a printed weight and packer's details is 5%. A 50 kg sack sold to a retailer, who weighs out rice for customers, is nil because it is above 25 kg.
Example: you buy 10 tonnes of loose rice and sell 8 tonnes in 50 kg sacks at Rs 52 a kg. That's Rs 4,16,000 of nil-rated sales. You repack the other 2,000 kg into 400 bags of 5 kg with Legal Metrology labels and sell them at Rs 60 a kg. Taxable value is Rs 1,20,000. GST at 5% is Rs 6,000: Rs 3,000 CGST and Rs 3,000 SGST on a sale within your state.
Do you need GST registration as a grain trader?
Step-by-Step Guide
Do I Need GST Registration for My Grain Trade?
1. Do you sell only loose grain or pulses (or packs above 25 kg)?
Every supply is nil-rated. You're not liable to register, whatever your turnover (Section 23(1)(a), CGST Act).
2. Do you also sell any pre-packaged and labelled packs of up to 25 kg?
Those are taxable at 5%. Now add up all sales, including nil-rated loose grain: aggregate turnover includes exempt supplies (Section 2(6)).
3. Is that aggregate turnover above the goods limit?
Rs 40 lakh for suppliers of goods only in most states (Notification 10/2019-Central Tax). Rs 20 lakh in states that kept the lower limit, including Telangana, Puducherry, Uttarakhand and the North-Eastern states listed in that notification (Section 22(1)).
4. Do you sell packed goods to buyers in another state?
An inter-State taxable supply needs registration from the first rupee (Section 24(i)). Inter-State sales of only loose, nil-rated grain don't trigger this.
Source: CGST Act ss. 2(6), 22(1), 23(1)(a), 24(i); Notification 10/2019-Central Tax
Example: a Warangal dal trader sells Rs 1.8 crore of loose toor and moong dal a year and starts a 1 kg packed line worth Rs 6 lakh. Her aggregate turnover is Rs 1.86 crore, well above Telangana's Rs 20 lakh limit, so she must register even though only Rs 6 lakh is taxable. Our GST registration threshold guide has the state-wise limits, and our GST registration service handles the application.
How much input tax credit can you keep?
Only the part that relates to your 5% sales. Nil-rated supplies are "exempt supplies" under Section 2(47) of the CGST Act, and credit used for exempt supplies isn't allowed (Section 17(2)).
Sort your purchases into three piles:
- Used only for packed goods: printed pouches, laminated bags, labels and the packing machine. Claim the full credit.
- Used only for loose trade: for example, a hired hamali contractor working only on sack sales. No credit.
- Common costs: godown rent, transport, weighbridge charges, accounting software, phone. Claim the credit, then reverse the exempt share under Rule 42 of the CGST Rules.
Example: in a month, GST on common costs is Rs 30,000. Your loose sales are Rs 40 lakh and packed sales Rs 10 lakh, so exempt sales are 80% of Rs 50 lakh. You reverse Rs 24,000 and keep Rs 6,000. Rule 42 works month by month, with a final true-up on the full year's figures. Our Rule 42 and 43 reversal guide shows the formula line by line.
Mandi commission agents (arhtiyas)
If you buy or sell for farmers on commission, it's a different tax picture.
- GST: services by a commission agent for sale or purchase of agricultural produce are exempt (Notification 12/2017-Central Tax (Rate), S. No. 54(g)). "Agricultural produce" means produce on which no further processing is done, or only what a cultivator usually does to make it marketable for the primary market. Paddy and wheat brought in by the farmer fit. Milled rice and split dal have been processed, so take a written view before calling that commission exempt.
- Income tax: commission or brokerage income and agency business can't use Section 44AD (Section 44AD(6)(ii) and (iii), 1961 Act; Section 58 eligible assessee conditions, 2025 Act). Keep books and declare actual profit.
Our fruit and vegetable wholesalers guide covers the mandi commission model in more detail.
Income tax for grain traders
Section 44AD fits poorly at low margins. A resident individual, HUF or partnership firm (not an LLP) trading on its own account can declare presumptive income if turnover is within Rs 2 crore, or Rs 3 crore if cash receipts are within 5% (Section 44AD, 1961 Act, for FY 2025-26; Section 58(2), Table Sl. No. 1, 2025 Act, from 1 April 2026). Income is at least 6% of bank or digital receipts and 8% of the rest. Grain margins are often well under that.
Example (proprietor, new regime, FY 2025-26): turnover Rs 2.6 crore, of which Rs 9 lakh came in cash (3.5%, within 5%, so the Rs 3 crore limit applies).
- Digital receipts Rs 2.51 crore at 6%: Rs 15,06,000.
- Cash receipts Rs 9 lakh at 8%: Rs 72,000.
- Presumptive income: Rs 15,78,000. Tax at new regime slabs is Rs 20,000 + Rs 40,000 + Rs 56,700 (15% on Rs 3,78,000) = Rs 1,16,700, plus 4% cess of Rs 4,668. Total Rs 1,21,368.
If his real margin is 3%, actual profit is Rs 7,80,000. That is within Rs 12 lakh, so the Section 87A rebate brings his tax to nil. To declare the lower figure he needs proper books, and may need a tax audit, which brings us to cash.
Cash paid to farmers. Cash payments above Rs 10,000 to one person in a day are disallowed (Section 40A(3), 1961 Act). Rule 6DD(e) of the Income-tax Rules 1962 (Rule 26(1)(e) of the Income-tax Rules 2026) exempts payments to the cultivator, grower or producer for agricultural produce. It doesn't cover cash paid to another trader or a middleman.
Why that cash still matters for audit. A business has to get its accounts audited if turnover exceeds Rs 1 crore. The limit rises to Rs 10 crore only if cash receipts and cash payments are each within 5% of the totals (Section 44AB(a), 1961 Act). Rule 6DD(e) saves the deduction but not the audit test. Pay Rs 30 lakh in cash to farmers out of Rs 2.5 crore of payments (12%) and the Rs 1 crore limit applies.
Receiving cash. You can't accept Rs 2 lakh or more in cash from one buyer in a day, for one transaction, or for one event (Section 269ST). The penalty is equal to the amount received (Section 271DA). See our cash transaction limits guide.
Comparison
Income Tax Rules a Grain Trader Meets: Old and New Section Numbers
| Rule | Rate or limit | 1961 Act (FY 2025-26) | 2025 Act (from 1 Apr 2026) |
|---|---|---|---|
| Presumptive income | 6% digital / 8% other; Rs 2 crore or Rs 3 crore | Section 44AD | Section 58 |
| No presumptive scheme for commission or agency | Keep books | Section 44AD(6) | Section 58 eligible assessee |
| TDS on purchase of goods | 0.1% above Rs 50 lakh per seller; buyer turnover above Rs 10 crore | Section 194Q | Section 393(1), Table Sl. No. 8(ii) |
| Cash to farmers for produce | Exception to the Rs 10,000 limit | Rule 6DD(e), 1962 Rules | Rule 26(1)(e), 2026 Rules |
| TCS on sale of goods | Not applicable from 1 April 2025 | Section 206C(1H) | None |
Source: Income-tax Act 1961 ss. 40A(3), 44AB(a), 44AD, 194Q, 206C(1H), 269ST, 271DA; Income-tax Act 2025 ss. 58, 393(1), 402(6); Income-tax Rules 1962 Rule 6DD; Income-tax Rules 2026 Rule 26
TDS on large purchases. If your turnover in the previous year exceeded Rs 10 crore, you deduct 0.1% on purchases from a resident seller beyond Rs 50 lakh in the year, on the amount above Rs 50 lakh. Buy Rs 80 lakh of wheat from one miller and the TDS is Rs 3,000 (0.1% of Rs 30 lakh). The seller-side TCS under Section 206C(1H) no longer applies from 1 April 2025 (proviso inserted by Finance Act 2025). Our 194Q vs 206C(1H) guide explains who deducts.
Deadline right now. If your FY 2025-26 accounts were audited, the return is due by 21 November 2026 (CBDT Circular 07/2026). Our ITR filing service can file it for you.
Common mistakes grain traders make
- Treating "unbranded" as tax-free. Since 22 September 2025 the test is pre-packaged and labelled, up to 25 kg. A plain 5 kg bag with a weight label is 5%.
- Skipping registration because most sales are nil. Once you sell taxable packs, nil sales count toward the limit.
- Claiming full credit on godown rent and transport. Common credit must be reversed in the ratio of your loose sales.
- Assuming farmer cash is "safe" for audit. Rule 6DD(e) protects the expense, not the 5% cash test.
- Using 44AD on commission income. Arhtiya commission is outside the presumptive scheme.
How Tax Garden helps grain traders
We split your loose and packed sales on every invoice, compute the Rule 42 reversal each month and file your GST returns on time. Our accounting and bookkeeping service keeps stock and cash ledgers that show whether 44AD or actual profit gives the lower tax, and flags farmer cash before it crosses the audit test. Our TDS filing service handles 194Q deductions on your mill purchases. For related topics, see our guides for flour and rice mill owners, kirana store owners and spice traders, and our Section 44AD guide.
