Looking for expert help with Income tax and GST for jaggery and khandsari 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
- Loose jaggery, khandsari sugar and rab are nil-rated. The same goods pre-packaged and labelled are 5% (Notification 10/2025-CT(R), S. No. 96; Notification 9/2025-CT(R), Schedule I, S. No. 106).
- "Pre-packaged and labelled" means retail packs of up to 25 kg that need Legal Metrology declarations. Your 30 kg boxes and 50 kg bags to traders stay nil-rated.
- A unit selling only loose jaggery needn't register for GST (Section 23(1)(a), CGST Act). Add labelled packs or molasses sales and the nil sales count toward the Rs 40 lakh (Rs 20 lakh in Telangana) threshold.
- If you sell both, input tax credit on common inputs is reversed in proportion to the nil-rated turnover (Section 17(2), Rule 42).
- Income tax: Section 44AD deems 6% or 8% of turnover as profit up to Rs 2 crore (Rs 3 crore if cash receipts are within 5%). Belated AY 2026-27 returns can be filed until 31 December 2026.
What is the GST rate on jaggery? Jaggery of all types, including cane jaggery (gur) and palmyra jaggery, khandsari sugar and rab are nil-rated when they aren't pre-packaged and labelled (S. No. 96, Notification 10/2025-Central Tax (Rate)). Pre-packaged and labelled, they're 5%: 2.5% CGST plus 2.5% SGST (S. No. 106, Schedule I, Notification 9/2025-Central Tax (Rate)), in force from 22 September 2025.
A jaggery unit's GST position turns on one question: how is the gur packed when it leaves the yard? Cubes stacked in a 30 kg carton for a trader in the mandi carry no GST. The same gur in a 1 kg printed pouch for a supermarket shelf carries 5%. Most units do some of both, and that split decides whether you register, what credit you can keep, and what your CA has to reverse at year end. This guide is for owners of jaggery (gur), khandsari and rab units, jaggery traders, and the CAs who handle their books. 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.
Jaggery GST rate and HSN code: loose gur vs packed gur
The rate tables were rewritten from 22 September 2025, but jaggery kept its two-way split. Here's how each product a jaggery unit typically buys or sells is treated:
Comparison
GST on Jaggery, Khandsari and By-Products from 22 September 2025
| Product (HSN) | GST | Notification entry |
|---|---|---|
| Jaggery of all types, cane jaggery (gur), palmyra jaggery, not pre-packaged and labelled (1701 or 1702) | Nil | 10/2025-CT(R), S. No. 96(i) |
| Khandsari sugar, not pre-packaged and labelled | Nil | 10/2025-CT(R), S. No. 96(ii) |
| Rab, not pre-packaged and labelled | Nil | 10/2025-CT(R), S. No. 96(iii) |
| Jaggery, khandsari sugar or rab, pre-packaged and labelled | 5% | 9/2025-CT(R), Schedule I, S. No. 106 |
| Molasses (1703) | 5% | 9/2025-CT(R), Schedule I, S. No. 109 |
| Bagasse and other waste of sugar manufacture (2303) | 5% | 9/2025-CT(R), Schedule I, S. No. 156 |
| Sugar cane, fresh or chilled, bought from farmers (1212) | Nil | 10/2025-CT(R), S. No. 88 |
| Paper or paperboard cartons and boxes (4819 10, 4819 20) | 5% (on your purchase) | 9/2025-CT(R), Schedule I, S. No. 322 |
Source: Notification 9/2025-Central Tax (Rate) and 10/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025. Notification 01/2026-Central Tax (Rate) amends neither entry.
What "pre-packaged and labelled" means. Notification 9/2025-Central Tax (Rate) defines it as commodities intended for retail sale, containing not more than 25 kg or 25 litre, that are "pre-packed" under Section 2(l) of the Legal Metrology Act 2009 and must carry that Act's declarations on the package or a label. Three things follow for a gur unit:
- Bulk packing to traders stays nil. A 30 kg carton or a 50 kg gunny bag is over 25 kg.
- Retail packs are 5%. 500 g, 1 kg and 5 kg pouches or boxes with your brand, weight and MRP printed on them are the typical case.
- A 10 kg or 20 kg pack is the grey zone. It's under 25 kg, so the answer depends on whether it's meant for retail sale and needs Legal Metrology declarations. Settle this with your CA before you print new bags.
Note also that S. No. 107 of Schedule I puts palmyra sugar, mishri, batasha, bura, chikkis and similar sweets at 5%. If you also make gur chikki or batasha, those are 5% whatever the packing.
Do you need GST registration?
Not if all you sell is loose jaggery. Section 23(1)(a) of the CGST Act exempts a person "engaged exclusively in the business of supplying goods ... that are not liable to tax or wholly exempt from tax" from registering, whatever the turnover.
The moment you also sell a taxable product, that exemption is gone and the normal threshold applies. That threshold is tested on aggregate turnover, which Section 2(6) defines to include exempt supplies. So your nil-rated loose sales count.
Example (unit in Telangana, FY 2026-27): you sell Rs 18 lakh of loose jaggery in cartons and Rs 4 lakh of 1 kg branded pouches. Aggregate turnover is Rs 22 lakh. Telangana is one of the States excluded from the Rs 40 lakh goods limit (Notification 10/2019-Central Tax), so your limit is Rs 20 lakh and you have to register. The same unit selling only the Rs 18 lakh of loose cartons wouldn't need to. Our GST registration limit guide has the full State list.
A consignment of labelled packs or molasses worth more than Rs 50,000 needs an e-way bill (Rule 138(1), CGST Rules). Loose jaggery is different: Rule 138(14)(e) says no e-way bill is needed for goods in the Schedule to Notification 2/2017-Central Tax (Rate), the nil-rate list that 10/2025-Central Tax (Rate) replaced from 22 September 2025. The rule still names the old notification, so confirm the position for your carton loads before you stop generating e-way bills. See our e-way bill guide.
Selling both loose and packed jaggery: the credit you have to reverse
Once registered, you can claim credit only for tax that relates to taxable sales. Section 17(2) of the CGST Act restricts credit on goods and services used partly for taxable and partly for exempt supplies to the share that goes into taxable supplies. Rule 42 of the CGST Rules works out that share in proportion to turnover.
In practice you split your purchases into three groups:
Step-by-Step Guide
Working Out Your Credit as a Mixed Jaggery Unit
Credit used only for packed jaggery
Printed pouches, labels and retail cartons used only for 5% packs. Full credit.
Credit used only for loose jaggery
Bulk cartons and gunny bags for the nil-rated trade. No credit at all.
Common credit
Crusher spares, repairs, transport and other inputs that serve both. Reverse the share equal to nil-rated turnover over total turnover (Rule 42).
True up at year end
Rule 42 is worked monthly and recomputed on the full year's turnover. Adjust the difference in your return.
Source: CGST Act 2017, Section 17(2); Rule 42, CGST Rules 2017
Example (one month): you sell Rs 24,00,000 of loose jaggery (nil) and Rs 6,00,000 of labelled 1 kg packs (5%, so Rs 30,000 output tax). Credit on printed pouches and labels is Rs 9,000. Common credit on crusher spares, repairs and freight is Rs 20,000. Nil-rated turnover is 80% of the total (24 out of 30 lakh), so you reverse Rs 16,000 of the common credit and keep Rs 4,000. Total credit is Rs 13,000 (Rs 9,000 plus Rs 4,000), and you pay Rs 17,000 in cash (Rs 30,000 less Rs 13,000).
Our Rule 42 and 43 guide explains the formula and the annual recalculation.
Why composition rarely suits a gur unit. A manufacturer under composition pays up to 1% of "turnover in State" (Section 10(1)(a), CGST Act), and Section 2(112) includes exempt supplies in that turnover. Take a unit with Rs 1.2 crore of sales, Rs 1 crore of it loose jaggery. Under composition it pays 1% of Rs 1.2 crore, which is Rs 1,20,000, with no credit. Under the regular scheme it charges 5% only on the Rs 20 lakh of packs, which is Rs 1,00,000 of output tax, and then reduces that by its eligible credit. See our composition scheme guide if your sales mix is different.
Income tax: 44AD, own cane and the AY 2026-27 dates
A jaggery unit's profit is business income. Two rules decide how much of it is taxed.
Presumptive tax under Section 44AD. Resident individuals, HUFs and partnership firms (not LLPs) with turnover up to Rs 2 crore can declare 6% of turnover received through banking channels and 8% of the rest as profit. The limit is Rs 3 crore if cash receipts don't exceed 5% of turnover. If you declare profit this way, you don't need a tax audit (first proviso to Section 44AB). From FY 2026-27, the same scheme sits in Section 58 of the Income-tax Act 2025.
Example (proprietor, FY 2025-26): turnover Rs 1,40,00,000, of which Rs 1,25,00,000 came by bank or UPI and Rs 15,00,000 in cash. Cash receipts are 10.71% of turnover, above 5%, so the limit is Rs 2 crore, and Rs 1.4 crore is within it. Deemed profit is Rs 7,50,000 (6% of Rs 1,25,00,000) plus Rs 1,20,000 (8% of Rs 15,00,000), or Rs 8,70,000. Our Section 44AD guide covers the five-year lock-in if you later drop out.
Jaggery made from your own cane: Rule 7. Plenty of gur units are run by cane farmers crushing their own harvest. Where income is partly agricultural and partly business, Rule 7(1) of the Income-tax Rules 1962 deducts the market value of the agricultural produce you raised and used as raw material from the business income, and allows no further deduction for what you spent as a cultivator. Rule 7(2)(a) takes market value as the average price at which that produce was sold in the market during the year.
Example (farmer-owned unit keeping regular accounts, FY 2025-26): jaggery sales Rs 12,00,000. You crushed 200 tonnes of your own cane, and say the average market price for cane that year was Rs 3,600 a tonne, so its market value is Rs 7,20,000. Crushing and boiling costs (labour, fuel, packing, repairs, depreciation) are Rs 2,30,000.
- Business income: Rs 12,00,000 less Rs 7,20,000 less Rs 2,30,000 = Rs 2,50,000.
- Agricultural income: Rs 7,20,000 less, say, Rs 3,10,000 of cultivation costs = Rs 4,10,000, exempt under Section 10(1). It still counts for working out the tax rate on your other income; see our agricultural income guide.
If you also buy cane from other farmers, that part is plain business income. Keep the farm accounts, the crushing register and the cane purchase register separate so the split can be shown.
AY 2026-27 dates. The 31 July 2026 due date for non-audit returns has passed. You can still file a belated return until 31 December 2026 (Section 139(4)), with a late fee of Rs 5,000, or Rs 1,000 if total income doesn't exceed Rs 5 lakh (Section 234F). See our belated return guide.
Cash to cane farmers and TDS from big buyers
Section 40A(3). A business expense is disallowed if you pay one person more than Rs 10,000 in cash in a day. Rule 6DD(e) exempts payments for agricultural produce made to the cultivator, grower or producer. Rs 60,000 in cash to the farmer who grew the cane stays deductible. The same Rs 60,000 to a cane contractor or agent doesn't. Keep the farmer's name, village and a signed receipt with each payment. Jaggery traders get a separate exemption under Rule 6DD(f) for products made without the aid of power in a cottage industry, paid to the producer, but most units now run powered crushers, so check before you rely on it.
Section 269ST. Nobody may receive Rs 2 lakh or more in cash from one person in a day, for one transaction or for one event. A Rs 2,50,000 cane bill can't be settled in cash in one go. See our cash limits guide.
TDS on your sales (Section 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 a year. From 1 April 2026 the same rule is in Section 393(1) [Table: Sl. No. 8(ii)] of the Income-tax Act 2025, with "buyer" defined in Section 402(6). Example (FY 2026-27): a wholesaler with Rs 40 crore turnover buys Rs 80,00,000 of jaggery from you. TDS is 0.1% of Rs 30,00,000, which is Rs 3,000. It will show in your annual tax statement, and you claim it as credit in your ITR. Our Section 194Q and 393 guide has the detail.
Common mistakes jaggery units make
- Charging 5% on bulk cartons. Packs above 25 kg aren't pre-packaged and labelled, so they're nil-rated. Billing them at 5% means collecting tax the law doesn't levy, and your trader buyers end up paying it.
- Not charging 5% on branded retail packs. Printing your brand and weight on 1 kg pouches for retail sale moves them into the 5% entry.
- Assuming loose sales don't count for registration. They don't trigger registration on their own, but once you sell anything taxable, they're part of aggregate turnover.
- Claiming full credit on common inputs. A mixed unit has to reverse the nil-rated share under Rule 42, every month and again at year end.
- Counting your own cane twice. Under Rule 7 you deduct the cane's market value from business income and no cultivation costs on top of that.
How Tax Garden helps jaggery and khandsari units
We check whether you need to register, get you registered through our GST registration service when you do, and keep loose and packed sales apart on every invoice. Every month we work out the Rule 42 reversal and file GSTR-1 and GSTR-3B through our GST return filing service. At year end we prepare the books, split farm and crushing income where you grow your own cane, and file your return through our ITR filing service. Related reading: our guides for sweet shops that buy your gur, flour and rice mills and beekeepers and honey packers, which also mix nil-rated and packed sales.
