Looking for expert help with Income tax and GST for hardware and paint 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
- Almost everything on a hardware or paint shop shelf is 18% GST: paints, putty, cement, PVC pipes, sanitaryware, taps, locks, fasteners, hand and power tools and wires (Notification 9/2025-Central Tax (Rate), Schedule II).
- Cement moved from 28% to 18% on 22 September 2025. Steel utensils are one of the few 5% items you may stock.
- Composition at 1% only pays if your stock costs less than about 79% of your GST-inclusive selling price, and your contractor customers lose input tax credit.
- Above Rs 5 crore turnover in any year since 2017-18, every B2B bill must be an e-invoice.
- Section 44AD deems 6% profit on digital receipts. Paint dealers on 4-6% margins should compare before filing.
What is the GST rate on paint and hardware items in India? Paints, varnishes, distempers, wall putty, cement, PVC pipes, sanitaryware, taps, locks, screws, nails, hand tools, power tools and electrical wires all attract 18% GST from 22 September 2025, under Schedule II of Notification 9/2025-Central Tax (Rate). Steel kitchen utensils (HSN 7323) and hand pumps (8413) are 5% under Schedule I.
A hardware and paint shop has two kinds of customers, and they want different things from your bill. The homeowner buying a tin of emulsion and a few screws wants the lowest price. The contractor or builder buying pipes and putty by the carton wants a proper tax invoice so they can claim input tax credit (ITC). Your GST scheme, your billing and even your income tax choice depend on which of these two pays most of your bills. This guide covers what a hardware or paint shop owner needs for GST and the AY 2026-27 income tax return. If you run a general store, our kirana store tax guide fits better.
What GST rate applies to what you sell?
The September 2025 rate changes left a hardware shelf almost entirely at 18%. Cement is the big change: it came down from 28%. Anything not listed in another schedule also falls in the 18% residual entry (Schedule II, S. No. 639).
Comparison
GST Rates for Hardware and Paint Shop Items (from 22 September 2025)
| Item | HSN | GST rate |
|---|---|---|
| Paints, varnishes, enamels, distempers | 3208, 3209, 3210 | 18% |
| Wall putty, caulking compounds, painters' fillings | 3214 | 18% |
| Adhesives and prepared glues | 3506 | 18% |
| Portland and similar cement | 2523 | 18% (was 28%) |
| PVC and plastic pipes and fittings | 3917 | 18% |
| Plastic sanitary ware, cisterns, seats | 3922 | 18% |
| Ceramic tiles; ceramic wash basins and WC pans | 6907, 6910 | 18% |
| Steel sanitary ware | 7324 | 18% |
| Nails, screws, bolts, nuts, washers (iron or steel) | 7317, 7318 | 18% |
| Hand tools; power tools | 8205, 8467 | 18% |
| Locks, door and window fittings, door closers | 8301, 8302 | 18% |
| Taps, cocks and valves | 8481 | 18% |
| Insulated wires and cables | 8544 | 18% |
| Steel kitchen utensils | 7323 | 5% |
| Hand pumps and parts | 8413 | 5% |
Source: Notification 9/2025-Central Tax (Rate), Schedule II S. No. 9, 50-52, 56, 75, 118, 123, 238, 240, 295, 296, 303, 365, 376, 377, 453, 466, 516, 639; Schedule I S. No. 416, 425
Check the supplier bill on older stock. Cement invoiced before 22 September 2025 carried 28%, and your ITC on it stays at what the supplier charged. Your sale today is at 18%.
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 hardware shop with Rs 25 lakh of sales must register.
In practice most hardware and paint shops register well before the limit. Contractors, builders and interior firms will only buy from you if your bill gives them ITC. Selling to a buyer in another state also needs registration from the first rupee (Section 24(i), CGST Act). See our GST registration service if you haven't registered yet.
Regular scheme or composition: which leaves you more money?
Under the composition scheme, a trader pays 1% of turnover (0.5% CGST plus 0.5% SGST, Rule 7, CGST Rules), up to Rs 1.5 crore turnover. In return you can't charge GST on your bill, you can't claim ITC, and you can't sell to other states (Section 10(2)(c), CGST Act).
If contractors are a big share of your sales, stop there. A composition dealer can only issue a bill of supply, so a contractor loses the 18% ITC on everything bought from you, and will buy from the regular-scheme shop down the road.
For a shop selling mostly to households, the answer turns on your margin. Here's one month at Rs 5,90,000 of GST-inclusive counter sales (Rs 5,00,000 plus Rs 90,000 GST under the regular scheme):
Comparison
One Month, Rs 5.9 Lakh of Counter Sales: Regular vs Composition
| Item | Regular scheme | Composition (trader) |
|---|---|---|
| Tax on sales | Rs 5,90,000 x 18/118 = Rs 90,000 | 1% x Rs 5,90,000 = Rs 5,900 |
| Shop A: stock bought Rs 4,80,000 + 18% GST | Rs 86,400 ITC; pays Rs 3,600 in cash | Rs 86,400 becomes cost |
| Shop A: total GST borne | Rs 90,000 | Rs 92,300 |
| Shop B: stock bought Rs 4,00,000 + 18% GST | Rs 72,000 ITC; pays Rs 18,000 in cash | Rs 72,000 becomes cost |
| Shop B: total GST borne | Rs 90,000 | Rs 77,900 |
Source: Rule 7, CGST Rules 2017; Notification 9/2025-Central Tax (Rate). Figures are illustrative.
Under the regular scheme the total always comes to Rs 90,000, because ITC just offsets part of the output tax. Under composition it's 1% of sales plus all the GST you paid on stock. The two meet when your purchases (before GST) are about 79% of your GST-inclusive sales. Shop A, a paint dealer buying at 81%, is Rs 2,300 a month better off on the regular scheme. Shop B, a hardware counter buying at 68%, saves Rs 12,100 a month under composition. Our composition scheme guide covers the other eligibility conditions.
Paint company schemes, credit notes and e-invoices
Paint and pipe companies often pass on turnover discounts after the sale, through credit notes. The GST treatment depends on how the discount was set up. A post-sale discount reduces the value of supply only if it was agreed at or before the time of supply, is linked to specific invoices, and the recipient reverses the matching ITC (Section 15(3)(b), CGST Act). Finance Act 2026 drops the prior-agreement and invoice-linking conditions, keeping only the credit note and ITC reversal, from a date the government is yet to notify. If the company issues a GST credit note, you reverse that ITC in your return. If it issues a "financial" credit note without GST, your ITC on the original bill stays as it is (CBIC Circular 251/08/2025-GST). Read each credit note before you file GSTR-3B.
Once your aggregate turnover crosses Rs 5 crore in any financial year from 2017-18 onwards, every B2B invoice you raise, such as a bill to a contractor or another dealer, must be an e-invoice with an Invoice Reference Number (IRN) from the Invoice Registration Portal (Notification 10/2023-Central Tax, from 1 August 2023). Retail bills to consumers stay outside it. Our e-invoicing guide walks through the portal.
TDS on big purchases: does Section 194Q apply to you?
Section 194Q applies only to a buyer whose turnover in the previous financial year was above Rs 10 crore. Large paint and sanitaryware distributors often cross that. If you do, deduct 0.1% on the amount by which your purchases from one resident seller exceed Rs 50 lakh in the year, at the time of credit or payment, whichever is earlier.
Example: a distributor with Rs 12 crore turnover in FY 2024-25 buys Rs 3 crore of paint from one company in FY 2025-26. TDS is 0.1% of Rs 2.5 crore, which is Rs 25,000.
Sellers used to collect TCS under Section 206C(1H) on the same purchases. Finance Act 2025 switched that off from 1 April 2025, so only the buyer's TDS remains. From tax year 2026-27 the TDS provisions sit in Section 393 of the Income-tax Act 2025; see our Section 194Q guide and our TDS filing service.
How is your income taxed for AY 2026-27?
Step-by-Step Guide
Choosing How to Report Your 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
Receipts by UPI, card, cheque or bank transfer count at 6%. Cash receipts count at 8%.
Compare with your real margin
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 hardware shop, new regime): Turnover Rs 1.2 crore, of which Rs 84 lakh by UPI, card and bank and Rs 36 lakh in cash. Cash is 30% of receipts, so the Rs 2 crore limit applies, and the shop is within it.
- Deemed profit: 6% of Rs 84 lakh (Rs 5,04,000) plus 8% of Rs 36 lakh (Rs 2,88,000), so Rs 7,92,000.
- Tax: 5% on the Rs 3,92,000 above Rs 4 lakh is Rs 19,600.
- The Section 87A rebate (income up to Rs 12 lakh) wipes it out. Tax payable: nil.
Example 2 (paint dealer, new regime): Turnover Rs 2.8 crore, with only Rs 5.6 lakh (2%) received in cash. Cash is within 5%, so the Rs 3 crore limit applies.
- Deemed profit: 6% of Rs 2,74,40,000 = Rs 16,46,400, plus 8% of Rs 5,60,000 = Rs 44,800. Total Rs 16,91,200.
- Tax: nil up to Rs 4 lakh, Rs 20,000 on Rs 4-8 lakh, Rs 40,000 on Rs 8-12 lakh, Rs 60,000 on Rs 12-16 lakh, and 20% of Rs 91,200 = Rs 18,240. Total Rs 1,38,240.
- No 87A rebate, as income is above Rs 12 lakh. Add 4% cess of Rs 5,530. Tax payable: Rs 1,43,770.
That Rs 16.91 lakh deemed profit is a 6.04% margin on turnover. If your books honestly show less, declaring actual profit may be cheaper. The cost: leaving Section 44AD after using it bars you from it for five years, and during that time you need books and a tax audit whenever income exceeds the basic exemption limit (Section 44AD(4) and (5), Section 44AB(e)). See our Section 44AD guide and old vs new regime guide.
Common mistakes hardware and paint shops make
- Still billing cement at 28%. Cement has been 18% since 22 September 2025. Update the rate in your billing software, not just on the shelf tag.
- Putting steel utensils at 18%. Steel kitchen utensils (7323) are 5%. If you stock them, give them their own item code.
- Opting for composition with contractor customers. Your bill of supply gives them no ITC, and a single sale to another state breaks eligibility.
- Ignoring the type of credit note. Treat a GST credit note and a financial credit note the same way and your ITC will be wrong in GSTR-3B.
- Taking a builder's cash payment of Rs 2 lakh or more. 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 hardware and paint shops
We file GSTR-1 and GSTR-3B for hardware and paint dealers, with contractor B2B invoices, counter sales and company credit notes reported in the right tables. See our GST return filing service. We also prepare your ITR and check whether Section 44AD or actual books gives the lower lawful tax; see our ITR filing service and pricing.
