Looking for expert help with GST and income tax for jute mills and jute bag makers 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
- Raw jute (5303) is nil GST under Notification 10/2025-CT(R), S. No. 146. It isn't on the reverse charge list, so there's no GST on buying it from farmers.
- Jute yarn, twine, hessian cloth and jute shopping bags are 5% from 22 September 2025 (Notification 9/2025-CT(R), Schedule I, S. Nos. 338, 355, 339 and 290). Jute sacks are 5% up to Rs 2,500 a piece; plastic woven sacks are 18%.
- Bag stitching and other job work on textiles of Chapters 50 to 63 is 5% (Notification 11/2017-CT(R), S. No. 26(ii)(g), substituted by 15/2025-CT(R)).
- Hessian is on the inverted refund bar list (5/2017-CT(R), S. No. 4). Yarn, twine and sacks aren't.
- Government buyers deduct GST TDS above Rs 2,50,000 per contract. Big buyers deduct 0.1% income tax TDS on purchases above Rs 50 lakh a year.
What is the GST rate on jute bags and jute sacks? 5%. Jute shopping bags and handbags (4202 22 30) are 5% at any price under Schedule I, S. No. 290 of Notification 9/2025-Central Tax (Rate). Jute sacks and other made-ups of Chapter 63 are 5% up to Rs 2,500 per piece (S. No. 390) and 18% above. Raw jute fibre is nil-rated.
Jute businesses work at very different scales. A composite mill in the Hooghly belt buys raw jute from farmers, spins it, weaves hessian and sacking and sells B-twill sacks to food procurement agencies. A small unit in Hyderabad buys laminated jute fabric and stitches printed shopping bags for retailers and corporate gifting. Each of them has a different rate on what it sells, a different refund position and different TDS obligations. 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.
Jute product GST rates by HSN code
Every jute product from yarn onward sits at 5%, except Chapter 63 made-ups priced above Rs 2,500 a piece.
Comparison
GST on Jute and Jute Products from 22 September 2025
| Product (HSN) | GST | Entry |
|---|---|---|
| Raw jute fibre, raw or processed but not spun (5303) | Nil | Notification 10/2025-CT(R), S. No. 146 |
| Jute yarn (5305 to 5308) | 5% | 9/2025-CT(R) Schedule I, S. No. 338 |
| Hessian, sacking cloth and other woven fabrics of vegetable textile fibres (5309 to 5311) | 5% | Schedule I, S. No. 339 |
| Twine, cordage and ropes, including jute twine (5607) | 5% | Schedule I, S. No. 355 |
| Handbags and shopping bags of jute (4202 22 30), any price | 5% | Schedule I, S. No. 290 |
| Jute sacks and other made-up textile articles of Chapter 63, up to Rs 2,500 per piece | 5% | Schedule I, S. No. 390 |
| Chapter 63 made-ups above Rs 2,500 per piece | 18% | Schedule II, S. No. 199 |
| Jute fabrics and articles used in machinery or plant (5911) | 5% | Schedule I, S. No. 386 |
| Jute particle board | 5% | Schedule I, S. No. 292 |
Source: Notifications 9/2025 and 10/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025. No jute entry was changed by the 2026 rate notifications. IGST on inter-State sales is the same rate.
Three points trip people up:
- The Rs 2,500 limit doesn't apply to jute shopping bags. They have their own entry (4202 22 30) with no value cap. Schedule II, S. No. 145 taxes other bags of heading 4202 at 18% but specifically leaves out "handbags and shopping bags, of cotton or jute". A Rs 3,200 designer jute tote is still 5%.
- The Rs 2,500 limit does apply to Chapter 63 articles. A jute sack sells far below it, so sacks stay at 5%. A decorative jute runner or cushion set sold at Rs 3,000 a piece goes to 18%.
- Plastic sacks are 18%. Woven polyethylene or polypropylene sacks (3923 or 6305, Schedule II, S. No. 200) and FIBC jumbo bags (6305 32 00, S. No. 201) are taxed at 18%, so a buyer comparing quotes sees a 13-point gap before price.
GST on bag stitching and jute job work
A lot of jute work is done on someone else's material. If a trader sends you laminated jute fabric and pays you per bag for cutting, printing and stitching, you're supplying a service, not selling bags. 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)). That covers spinning, weaving, stitching and finishing on jute owned by the principal.
Because job charges are a service, the job worker registers once turnover crosses Rs 20 lakh under Section 22(1) of the CGST Act. The Rs 40 lakh limit is only for suppliers "engaged exclusively in the supply of goods". Telangana is outside Notification 10/2019-Central Tax, so even a unit selling only its own bags registers at Rs 20 lakh there. Our registration limit guide lists the States.
Example: a Hyderabad stitching unit earns Rs 36,00,000 of bag stitching charges in FY 2026-27 from four traders. It registers, charges 5% (Rs 1,80,000 for the year) and takes credit on thread, needles and other inputs bought with GST. If the traders are registered, they move fabric to it under a delivery challan under Section 143 and file ITC-04. Our job work guide has the challan steps.
Inverted duty refund: hessian vs yarn and sacks
Most jute products are 5%, but dyes (3204, Schedule II, S. No. 46) are 18%, and so are spinning machines (8445, S. No. 432), looms (8446, S. No. 433) and their parts (8448, S. No. 435). Whether you can get stuck credit back depends on your product.
Notification 5/2017-CT(R) bars refunds of unutilised input credit on woven fabrics, including "woven fabrics of other vegetable textile fibres" of 5309 to 5311. Yarn, twine and Chapter 63 sacks aren't on its list, so a yarn or sack unit can claim under Section 54(3).
In practice a composite mill rarely has much to claim. Raw jute, its biggest input, is exempt and carries no credit. Machinery credit doesn't count, because Rule 89(5) uses credit on inputs only. A unit that buys 5% jute yarn or fabric and 18% dyes and inks, and sells 5% bags, is more likely to build up a balance. Our inverted duty refund guide walks through the formula.
Selling to government buyers: GST TDS
Jute sacks go to food procurement agencies, and jute bags go to government offices and schemes. When the buyer is a government department, a local authority, a government agency or a notified body, Section 51 of the CGST Act requires it to deduct GST TDS at 1% central tax (with matching State tax) once the total value of supply under a contract exceeds Rs 2,50,000, excluding GST.
Step-by-Step Guide
How GST TDS Works on a Government Jute Bag Order
The contract
A State government department in Telangana orders jute bags from a Telangana supplier. Contract value Rs 10,00,000 plus 5% GST of Rs 50,000. The value is above Rs 2,50,000, so Section 51 applies.
The deduction
TDS is worked out on Rs 10,00,000, the value excluding GST (Explanation to Section 51(1)). 1% CGST plus 1% SGST = Rs 20,000. The department pays you Rs 10,30,000.
Deposit by the buyer
The department pays the Rs 20,000 to the government within ten days after the end of the month (Section 51(2)) and reports it in its return.
Your credit
You accept the entry on the GST portal and the Rs 20,000 reaches your electronic cash ledger (Section 51(5)). Use it to pay next month's GST.
When there's no deduction
If your location and the place of supply are in a State other than the department's State of registration, no TDS is deducted (proviso to Section 51(1)).
Source: CGST Act 2017, Section 51, read from taxinformation.cbic.gov.in
Income tax: TDS on purchases, job work and cash for raw jute
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 a cement company buys Rs 80,00,000 of sacks from you in FY 2026-27. TDS is 0.1% of Rs 30,00,000, which is Rs 3,000, and it shows in your Form 26AS. The same rule binds a large mill buying raw jute from a trader. Our 194Q guide covers the buyer test.
TDS on job work. Making bags to a customer's design from material bought from that customer is "work" under Section 402(47)(e) of the 2025 Act (Section 194C of the 1961 Act for FY 2025-26). If your firm or company gives fabric to a stitching unit, deduct 1% (individual or HUF) or 2% (others) once one bill crosses Rs 30,000 or the year's total crosses Rs 1,00,000 (Section 393(1), Table Sl. No. 6(i)). See our contractor TDS guide.
Paying farmers in cash. A business can't normally deduct an expense paid in cash above Rs 10,000 to one person in a day: Section 40A(3) of the 1961 Act, and Section 36(4) of the 2025 Act from 1 April 2026. Rule 26(1)(e)(i) of the Income-tax Rules 2026 (Rule 6DD(e) of the 1962 Rules before that) makes an exception for agricultural produce bought from the cultivator, grower or producer. Raw jute bought straight from the farmer qualifies. Cash paid to a middleman for the same jute doesn't. Our Section 40A(3) guide lists the other exceptions. Bank or UPI payments are still the safer record.
Section 44AD for small units. A resident individual, HUF or partnership firm (not an LLP) can declare presumptive profit:
Comparison
Section 44AD for a Jute Bag 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 sewing 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 making jute shopping bags has FY 2025-26 turnover of Rs 2,50,00,000. Rs 2,45,00,000 came by bank and Rs 5,00,000 in cash, which is 2% of turnover, so the Rs 3 crore limit applies. Deemed profit is 6% of Rs 2.45 crore (Rs 14,70,000) plus 8% of Rs 5 lakh (Rs 40,000), so Rs 15,10,000. Under the new regime: nil up to Rs 4 lakh, Rs 20,000 on Rs 4 to 8 lakh, Rs 40,000 on Rs 8 to 12 lakh and 15% of Rs 3,10,000 (Rs 46,500) above Rs 12 lakh. That's Rs 1,06,500, plus 4% cess of Rs 4,260, for Rs 1,10,760. No Section 87A rebate, because income is above Rs 12 lakh. Our Section 44AD guide explains the opt-out rule.
Common mistakes jute businesses make
- Charging 18% on jute shopping bags above Rs 2,500. The Rs 2,500 cap is in the Chapter 63 entry. Jute shopping bags under 4202 22 30 are 5% at any price.
- Billing jute and plastic sacks at one rate. Jute sacks are 5%; PP and HDPE woven sacks are 18%.
- Filing a refund on hessian. Woven jute fabric is on the 5/2017-CT(R) bar list. Yarn and sacks aren't.
- Ignoring GST TDS credit. Government deductions only reach your cash ledger after you accept them on the portal.
- Paying a jute middleman in cash above Rs 10,000 a day. The farmer exception covers only the cultivator, grower or producer.
- Registering a stitching unit at Rs 40 lakh. Job charges are a service, so the limit is Rs 20 lakh.
How Tax Garden helps jute mills and bag makers
We sort your sales into the right entries (sacks, shopping bags, yarn, hessian or job work) and check the Rs 2,500 test on every Chapter 63 line. Our GST return filing service files GSTR-1, GSTR-3B and ITC-04, accepts GST TDS credits and works out whether a Rule 89(5) refund is worth filing. New units can start with GST registration. On the income tax side we handle 194Q and job work TDS through our TDS filing service and compare Section 44AD with your books before filing your return through our ITR filing service. Paper and plastic bag makers can read our bag manufacturers guide, and the textiles HSN guide covers other fabrics. Call or WhatsApp us on 9640290977.
