Looking for expert help with GST and income tax for mushroom farm 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
- Fresh, frozen, dried and provisionally preserved mushrooms are all GST-free from 22 September 2025 (Notification 10/2025-Central Tax (Rate), S. No. 35, 36, 37 and 38). Labelled supermarket packs stay nil too.
- Canned or ready-to-eat mushrooms (heading 2003) and mushroom pickle made with vinegar (heading 2001) are 5% (Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 127 and 125).
- A farm selling only exempt items doesn't need GST registration, whatever its turnover (Section 23(1)(a), CGST Act). One taxable product brings the turnover limit into play.
- Whether indoor mushroom farming is "agricultural income" isn't settled by the Income-tax Act. Treating it as business income, with Section 44AD (6% or 8% deemed profit) if turnover is within Rs 2 crore, is the safer course.
- Take bulk payments from wholesalers by bank or UPI. Rs 2 lakh or more in cash from one buyer in a day carries a penalty equal to the amount (Sections 269ST and 271DA).
What is the GST rate on mushrooms in India? Fresh, chilled, frozen and dried mushrooms carry nil GST under S. No. 35 to 38 of Notification 10/2025-Central Tax (Rate), in force from 22 September 2025, with no packaging condition. Canned or otherwise prepared mushrooms (heading 2003) are 5% under Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 127.
Button and oyster mushroom units have spread well beyond hill states. A climate-controlled room on the edge of Hyderabad or Pune can produce 100 kg or more a day for supermarkets, hotels and wholesale markets, and the larger units turn over more than Rs 1 crore a year. Two questions come up with every new grower: do I charge GST, and is this farm income tax-free? The first has a clear answer for most of what a farm sells. The second is less tidy than most people assume. This guide covers both for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the GST rates in force since 22 September 2025.
GST rate and HSN code for mushrooms and mushroom farm inputs
The short version: if the mushroom hasn't been cooked, canned or pickled, there's no GST on it. Freezing, drying, slicing and powdering don't change that, and neither does a printed label.
Comparison
GST on Mushrooms, By-Products and Inputs (from 22 September 2025)
| Item | GST | Entry |
|---|---|---|
| Fresh or chilled mushrooms: button, oyster, milky, shiitake (0709, other vegetables) | Nil | Notif 10/2025-CT(R), S. No. 35 |
| Frozen mushrooms, uncooked or steamed or boiled (0710) | Nil | Notif 10/2025-CT(R), S. No. 36 |
| Mushrooms provisionally preserved (for example in brine for transport), unfit to eat in that state (0711) | Nil | Notif 10/2025-CT(R), S. No. 37 |
| Dried mushrooms, whole, cut, sliced, broken or in powder, not further prepared (0712) | Nil | Notif 10/2025-CT(R), S. No. 38 |
| Spent mushroom compost and organic manure, not pre-packaged and labelled (3101) | Nil | Notif 10/2025-CT(R), S. No. 116 |
| Wheat or paddy straw for compost, unprepared, chopped or pressed (1213) | Nil | Notif 10/2025-CT(R), S. No. 89 |
| Live plants, bulbs, roots and the like (Chapter 6) | Nil | Notif 10/2025-CT(R), S. No. 26 |
| Mushrooms prepared or preserved otherwise than by vinegar: canned, ready-to-eat (2003) | 5% | Notif 9/2025-CT(R), Sch I, S. No. 127 |
| Mushrooms prepared or preserved by vinegar or acetic acid: vinegar pickles (2001) | 5% | Notif 9/2025-CT(R), Sch I, S. No. 125 |
| Organic fertiliser (compost), pre-packaged and labelled (3101) | 5% | Notif 9/2025-CT(R), Sch I, S. No. 237 |
| Nitrogenous fertilisers used in compost, such as urea (3102) | 5% | Notif 9/2025-CT(R), Sch I, S. No. 238 |
Source: Notification 10/2025-Central Tax (Rate) (exemptions) and Notification 9/2025-Central Tax (Rate), Schedule I (2.5% CGST + 2.5% SGST), both dated 17 Sep 2025, in force 22 Sep 2025, read with amendments up to Notifications 02/2026 and 03/2026-Central Tax (Rate) of 28 Oct 2026
Three points matter in practice.
The label doesn't matter for raw mushrooms. Several nil entries in Notification 10/2025 apply only to goods "other than pre-packaged and labelled" (pulses and organic manure are two). The entries for headings 0709, 0710, 0711 and 0712 carry no such condition. Your 200 g supermarket punnet with a brand sticker is still nil.
Processing is where GST starts. Once mushrooms are cooked and canned, or packed ready to eat, they move to heading 2003 and 5%. Mushroom pickle in vinegar falls in heading 2001, also 5%. If you're planning a pickle or ready-to-cook line, our pickle and papad makers guide covers the compliance side of food processing.
Spawn. Mushroom spawn is usually billed under Chapter 6 of the tariff, which the nil entry at S. No. 26 covers. Check the heading on your spawn lab's invoice. If it shows 5% or 18%, ask the supplier which heading they've used.
What you can't escape is GST on equipment and packaging: air conditioners, humidifiers, racks, polybags and cartons are taxed at their own rates. A farm selling only exempt mushrooms can't recover that tax, because Section 17(2) of the CGST Act blocks input tax credit on inputs used for exempt supplies. Budget it as a cost.
Does your mushroom farm need GST registration?
Many growers assume the "agriculturist" exemption covers them. It may not. Section 23(1)(b) of the CGST Act exempts an agriculturist only "to the extent of supply of produce out of cultivation of land", and Section 2(7) defines an agriculturist as an individual or HUF who undertakes cultivation of land. Growing mushrooms on compost trays in a shed sits awkwardly with that wording. The rule that clearly protects a mushroom farm is a different one.
Step-by-Step Guide
Does Your Mushroom Farm Need GST Registration?
List everything you sell
Fresh, frozen, dried or powdered mushrooms and loose spent compost: all exempt. Canned mushrooms, vinegar pickles, bagged and labelled compost, or a taxable service such as paid training courses: taxable.
Only exempt items? Stop here
Section 23(1)(a) of the CGST Act: a person supplying only wholly exempt goods or services isn't liable to register, whatever the turnover.
Any taxable item? Add up aggregate turnover
Section 2(6) counts taxable AND exempt supplies. Your fresh mushroom sales count, even though they carry no GST.
Compare with the limit
For goods only: Rs 40 lakh in most states, Rs 20 lakh in Telangana and nine other states (Notification 10/2019-Central Tax). Add a taxable service and the Rs 20 lakh services limit applies.
Over the limit? Register
Charge GST only on the taxable lines. Nil lines go on the same bill and are reported as exempt supplies in your returns.
Source: Sections 2(6), 2(7), 17(2), 22 and 23(1), CGST Act 2017; Notification 10/2019-Central Tax
Example: a button mushroom unit near Shamshabad sells Rs 45 lakh of fresh mushrooms to supermarkets and hotels in a year. That's all exempt, so it doesn't register. Next year it adds Rs 8 lakh of canned mushrooms in brine.
- Aggregate turnover: Rs 45,00,000 + Rs 8,00,000 = Rs 53,00,000.
- That's over Telangana's Rs 20 lakh goods limit, so the farm must register, even though only Rs 8 lakh is taxable.
- GST is 5% on the canned line only: 5% of Rs 8,00,000 = Rs 40,000.
- Turn the same surplus into dried mushroom powder instead, and it stays nil with no registration needed.
Our GST registration service handles the application, and our turnover limit guide explains aggregate turnover. If you sell through mandi agents, our fruit and vegetable wholesalers guide covers the commission side.
Is mushroom farming income agricultural income?
This is the question growers ask most, and the honest answer is that the Income-tax Act doesn't settle it.
Section 2(1A) of the Income-tax Act 1961 defines agricultural income as rent or revenue from land in India used for agricultural purposes, and income from such land by agriculture, by the processes a cultivator uses to make produce fit for market, or by selling that produce. The Act doesn't define "agriculture", and it doesn't mention mushrooms. The same wording carries into Section 2(5) of the Income-tax Act 2025 from 1 April 2026.
Comparison
Agricultural Income or Business Income? What the Act Says
| Point | What the text says | What it means for a mushroom unit |
|---|---|---|
| Source of income | Must be derived from land used for agricultural purposes (s.2(1A)(a), (b)) | Indoor mushrooms grow on compost in trays or bags, not in the soil of the land |
| Meaning of agriculture | Not defined in the 1961 Act or the 2025 Act | No statutory rule either way for mushrooms |
| Special deeming rule | Only saplings or seedlings grown in a nursery are deemed agricultural income (Explanation 3 to s.2(1A); s.2(5)(d), 2025 Act) | No equivalent rule for mushrooms |
| If treated as business income | Taxed under Profits and gains of business or profession | Section 44AD presumptive scheme available |
Source: Section 2(1A) and Explanation 3, Income-tax Act 1961 (as amended by Finance Act 2025); Section 2(5), Income-tax Act 2025
Parliament had to write a specific rule to bring nursery saplings inside agricultural income. Nothing similar exists for mushrooms, and a crop grown on compost inside a building is a long way from cultivating the land itself. If you file mushroom profit as exempt agricultural income, expect that claim to be open to challenge in scrutiny.
The safer course for most growers is to report mushroom income as business income. If you also grow paddy or vegetables in the field, that field income can still be agricultural income, exempt under Section 10(1); our agricultural income guide explains how it's reported. Plant nurseries are the one farm-adjacent business with an express rule, covered in our nursery owners guide.
Section 44AD. A resident individual, HUF or partnership firm (not an LLP) whose turnover is within Rs 2 crore, or Rs 3 crore if cash receipts are within 5% of turnover, can declare deemed profit of 6% of receipts through banking channels and 8% of the rest. No books are needed for that business, and you can file ITR-4 if total income is within Rs 50 lakh and the other conditions are met. See our Section 44AD guide.
Example (button mushroom unit, proprietor, new tax regime, FY 2025-26): sales of Rs 1,50,00,000, of which Rs 15,00,000 came in cash from small retailers at the wholesale market. Cash is 10% of turnover, so the Rs 2 crore limit applies, and Rs 1.5 crore is within it.
- 6% of Rs 1,35,00,000 (bank and UPI) = Rs 8,10,000.
- 8% of Rs 15,00,000 (cash) = Rs 1,20,000.
- Deemed profit: Rs 9,30,000.
- Tax: Rs 4-8 lakh at 5% = Rs 20,000, plus Rs 8-9.3 lakh at 10% = Rs 13,000. Total Rs 33,000.
- Income is within Rs 12 lakh, so the Section 87A rebate of up to Rs 60,000 covers it. Tax payable: nil, but the return still has to be filed.
Had all Rs 1.5 crore come by bank transfer or UPI, deemed profit would be 6% of the full amount, Rs 9,00,000, which is Rs 30,000 lower.
Tax Rate Chart
New Tax Regime Slabs, FY 2025-26 (AY 2026-27)
Up to Rs 4 lakh
Rs 4-8 lakh
Rs 8-12 lakh
Rs 12-16 lakh
Rs 16-20 lakh
Rs 20-24 lakh
Above Rs 24 lakh
Source: Section 115BAC(1A), Income-tax Act 1961, as amended by Finance Act 2025
When a crop fails. Contamination, a compost batch gone wrong or a power cut in peak summer can wipe out a flush and push actual profit below 6%. You can then declare actual profit, but Section 44AD(4) applies: if you used 44AD in any of the previous five years and now declare less, you can't come back to 44AD for the next five years. If your income is above the basic exemption limit, Section 44AD(5) then requires books and a tax audit under Section 44AB. Our tax audit guide explains the thresholds.
Cash sales and filing dates
Cash from buyers. Section 269ST bars receiving Rs 2 lakh or more in cash from one person in a day, for a single transaction, or for transactions relating to one event. Say a wholesaler lifts 1,250 kg over a week at Rs 160 a kg and settles the Rs 2,00,000 in cash in one go. That breaks the rule, and the penalty under Section 271DA is Rs 2,00,000, the full amount. Twenty small retailers each paying Rs 8,000 in cash is fine, because each receipt is from a different person. Our cash transaction limits guide has more examples.
Filing window. If mushroom income is business income, the original due date for an AY 2026-27 return without a tax audit was 31 August 2026. A belated return can still be filed by 31 December 2026 (Section 139(4)), with a late fee of Rs 5,000, or Rs 1,000 if total income is within Rs 5 lakh (Section 234F). From FY 2026-27 the Income-tax Act 2025 replaces the 1961 Act and section numbers change, but your FY 2025-26 return still follows the 1961 Act.
Common mistakes mushroom growers make
- Calling everything "agricultural income" and not filing. The Act gives mushrooms no express exemption. Skipping the return leaves a 44AD-level profit unreported and any TDS unclaimed.
- Charging GST on fresh or dried mushrooms. They're nil, whether loose, frozen, dried or in a labelled punnet. Adding GST to the bill only inflates your price against growers who don't.
- Assuming canned and pickled lines are nil too. Heading 2003 and 2001 products are 5%, and they pull your whole turnover into the registration test.
- Leaving exempt sales out of aggregate turnover. Once you sell anything taxable, fresh mushroom sales count toward the limit.
- Large cash settlements from wholesalers. Rs 2 lakh or more from one buyer in a day triggers a penalty equal to the amount.
How Tax Garden helps mushroom farms
We check whether your product mix keeps you outside GST or pushes you over the limit, register you if needed and set up invoices that separate nil and 5% lines. At year end we look at how your income should be reported, compare Section 44AD with actual profit after a bad batch, and file through our ITR filing service. Larger units that keep books can use our accounting and bookkeeping service. If you store produce with a third party, our cold storage guide shows the other side of that bill.
