Looking for expert help with Income tax and GST for pottery and clay diya 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
- Clay diyas and earthen pots (6912 00 40) and clay idols (Chapter 69) are GST-exempt under Notification 10/2025-CT(R), S. No. 151 and 152, for sales within and outside your State.
- Terracotta decor (6913) and other clay tableware and kitchenware (6912) are 5% (Notification 9/2025-CT(R), Schedule I, S. No. 405 and 404). "Other ceramic articles" (6914) are 18%.
- If you sell only exempt items, you don't need GST registration at any turnover (Section 23(1)(a), CGST Act). Mix in taxable terracotta and the diya sales count towards the limit.
- Handmade pottery can go to other States and to festival stalls without registration within the turnover limit (Notifications 3/2018-Integrated Tax and 56/2018-Central Tax), but every inter-State consignment needs an e-way bill.
- Income tax: Section 44AD deems 6% of digital receipts and 8% of cash receipts as profit, for turnover up to Rs 2 crore (Rs 3 crore with cash within 5%).
Is there GST on clay diyas and earthen pots? No. Earthen pots and clay lamps (tariff item 6912 00 40) are exempt from GST under Notification 10/2025-Central Tax (Rate), S. No. 151, and idols made of clay under S. No. 152, from 22 September 2025. Terracotta statues and ornamental pieces (6913) and other clay tableware and kitchenware (6912) are taxed at 5%.
For most potters, a third or more of the year's sales come in the weeks before Diwali and Durga Puja. Lakhs of diyas, kalash pots and clay idols go out to traders and street sellers in that window. The GST questions are the same every season: do I need to register at all, what happens when a Pune trader also wants terracotta horses and wall hangings, and can I send a truck of handmade goods to another State without a GSTIN? This guide answers those for village potters, terracotta workshops, idol makers and the CAs who keep 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 Income-tax Act 2025 numbers that apply from 1 April 2026.
Clay diya, pottery and terracotta GST rate and HSN code
The split is narrower than most potters think. Only three descriptions are exempt. Everything else made of clay is taxed.
Comparison
GST on Pottery and Clay Products from 22 September 2025
| Product (HSN) | GST | Notification entry |
|---|---|---|
| Earthen pots and clay lamps (diyas) (6912 00 40) | Nil | 10/2025-CT(R), S. No. 151 |
| Idols made of clay (Chapter 69) | Nil | 10/2025-CT(R), S. No. 152 |
| Other tableware, kitchenware and household articles of clay, not porcelain (6912) | 5% | 9/2025-CT(R), Schedule I, S. No. 404 |
| Terracotta and ceramic statues and ornamental articles (6913) | 5% | Schedule I, S. No. 405 |
| Ceramic pots and jars for carrying or packing goods (6909) | 5% | Schedule I, S. No. 402 |
| Porcelain or china tableware and kitchenware (6911) | 5% | Schedule I, S. No. 403 |
| Other ceramic articles (6914) | 18% | Schedule II, S. No. 241 |
| Earthen or roofing tiles (6905 10 00) | 12% | 14/2025-CT(R): 6% CGST plus 6% SGST |
Source: Notifications 9/2025, 10/2025 and 14/2025-Central Tax (Rate), all 17 September 2025, in force 22 September 2025. Notification 10/2025-Integrated Tax (Rate) repeats S. No. 151 and 152 for inter-State supplies.
Three points trip people up:
- The diya exemption is about the material. The entry reads "Earthen pot and clay lamps". It doesn't separate plain lamps from painted ones. A brass diya, a wax diya or a Plaster of Paris lamp isn't a clay lamp, so it isn't covered.
- Clay idols are exempt, PoP idols aren't. S. No. 152 says "Idols made of clay". If your workshop also casts Plaster of Paris Ganeshas, those carry their own rate. Bill them as a separate item.
- Kulhads, clay cookers and water bottles need a tariff check. Whether an item is an "earthen pot" under 6912 00 40 (nil) or other clay tableware under 6912 (5%) depends on the tariff item it falls in. Settle it with your CA once for each product and keep the HSN in your item master. Don't change it from bill to bill.
If you also make roofing tiles, our brick kiln guide covers the special 12% / 6% scheme for tiles and bricks.
Do you need GST registration?
Start with what you sell, not how much.
- Only exempt goods. Section 23(1)(a) of the CGST Act says a person "engaged exclusively in the business of supplying goods... wholly exempt from tax" isn't liable to register. A potter who sells only diyas, earthen pots and clay idols needs no GSTIN, even at Rs 1 crore of sales.
- Exempt plus taxable goods. Once you sell even some terracotta decor or clay tableware, the exemption in Section 23(1)(a) is gone. The registration limit then applies, and "aggregate turnover" under Section 2(6) includes your exempt diya sales. Notification 10/2019-Central Tax sets the limit at Rs 40 lakh for goods-only suppliers. Telangana is one of the States left out of that notification, so a Hyderabad potter registers at Rs 20 lakh. Makers of earthen or roofing tiles were also taken out of the Rs 40 lakh limit by Notification 3/2022-Central Tax.
- Sales to other States. Section 24(i) normally makes registration compulsory for any inter-State taxable supply. Handmade pottery has its own exemption, covered below.
- Online marketplaces. Notification 34/2023-Central Tax (from 1 October 2023) lets you sell taxable goods on Amazon, Flipkart or Meesho without registering, if turnover is within the Section 22(1) limit, you sell in only one State, make no inter-State supply, and get an enrolment number on the GST portal against your PAN before your first sale.
Example: a potter in Rangareddy district sells Rs 15,00,000 of diyas and kalash pots and Rs 8,00,000 of terracotta wall hangings in FY 2026-27. Aggregate turnover is Rs 23,00,000, including the exempt Rs 15 lakh. That's above the Rs 20 lakh Telangana limit, so registration is needed. The same potter selling only the Rs 15 lakh of diyas and pots wouldn't need to register.
Handmade pottery sent to other States or sold at festival stalls
Two notifications use the same list of handmade products. S. No. 19 of that list is "Pottery and clay products, including terracotta" under HSN 6901, 6909, 6911, 6912, 6913 and 6914, "when made by the craftsmen predominantly by hand even though some machinery may also be used".
- Notification 3/2018-Integrated Tax exempts persons making inter-State taxable supplies of these goods from registration.
- Notification 56/2018-Central Tax gives casual sellers of the same goods the same exemption. This covers a stall at a Diwali mela or a crafts fair in another State.
Both apply only if the "aggregate value of such supplies, to be computed on all India basis" stays within the Section 22(1) registration limit. Both require a PAN and an e-way bill under Rule 138 of the CGST Rules. A proviso to Rule 138(1) makes the e-way bill compulsory for these inter-State consignments "irrespective of the value of the consignment", so even a Rs 10,000 van load to Bengaluru needs one. As an unregistered person, you first enrol on the e-way bill portal in Form GST ENR-03.
Our GST registration limit guide lists the States on the Rs 20 lakh limit, and the e-way bill guide walks through the portal. If you're over the limit, our GST registration service files the application.
How much input tax credit can you claim?
Your main inputs are taxed: clay bought on invoice is 5% (9/2025-CT(R), Schedule I, S. No. 169, heading 2508), kiln coal is 18% (Schedule II, S. No. 23, heading 2701), and paints and varnishes for decor pieces are 18% (Schedule II, S. No. 50 to 52). The catch is that your diyas and clay idols are exempt. Section 17(2) of the CGST Act allows credit only on the part of your inputs that goes into taxable supplies.
Rule 42 of the CGST Rules sets the split each month:
- Credit on inputs used only for taxable goods (paint for terracotta decor) is fully allowed.
- Credit on inputs used only for exempt goods is not allowed.
- Common credit (coal and clay used for everything) is split by turnover. The exempt share is D1 = (E ÷ F) x C2, where E is exempt turnover, F is total turnover in the State and C2 is the common credit.
Example (one month, registered potter): sales are Rs 6,00,000 of diyas (exempt) and Rs 4,00,000 of terracotta decor at 5%, so output tax is Rs 20,000.
| Input | Value | GST | Credit | Used for |
|---|---|---|---|---|
| Kiln coal | Rs 1,00,000 | 18% | Rs 18,000 | Both |
| Clay | Rs 50,000 | 5% | Rs 2,500 | Both |
| Paints and varnish | Rs 20,000 | 18% | Rs 3,600 | Decor only |
Step-by-Step Guide
Splitting Credit Between Exempt Diyas and Taxable Decor (Rule 42)
Set aside credit for taxable-only inputs
Paint used only on decor pieces: Rs 3,600, fully allowed.
Find the common credit (C2)
Coal Rs 18,000 plus clay Rs 2,500: Rs 20,500.
Work out the exempt share (D1)
E ÷ F = Rs 6,00,000 ÷ Rs 10,00,000 = 60%. D1 = 60% of Rs 20,500 = Rs 12,300, which is reversed.
Pay the balance
Credit allowed: Rs 3,600 + Rs 8,200 = Rs 11,800. Tax payable in cash: Rs 20,000 - Rs 11,800 = Rs 8,200.
Source: CGST Act 2017, Section 17(2); Rule 42(1), CGST Rules 2017. Rule 42 also sets aside a share for non-business use; this example assumes none.
Rule 42 works monthly in GSTR-3B, then it's trued up for the full year. In the Diwali months your exempt share shoots up, so expect a bigger reversal then. Clay bought from unregistered diggers comes with no GST, so there's no credit to split on it.
Composition or regular scheme?
Composition looks simple, but it suits few potters who sell diyas. Under Rule 7 of the CGST Rules, a manufacturer on composition pays 0.5% CGST plus 0.5% SGST on "turnover in the State". Section 2(112) defines that turnover to include exempt supplies. So composition puts 1% tax on diyas and clay idols that are nil-rated under the regular scheme.
Comparison
Composition vs Regular GST for a Potter
| Point | Composition (manufacturer) | Regular scheme |
|---|---|---|
| Tax on diyas and clay idols | 1% (part of turnover in the State) | Nil |
| Tax on terracotta decor and tableware | 1% | 5% (minus allowed credit) |
| Credit on coal, clay, paint | Not allowed | Allowed for the taxable share |
| Sales to other States | Not allowed (Section 10(2)(c)) | Allowed |
| Stalls in other States as a casual taxable person | Not allowed (Section 10(2)(f)) | Allowed |
| Roofing tile makers (6905 10 00) | Barred (Notification 14/2019-CT, as amended by 4/2022-CT) | Allowed |
Source: CGST Act 2017, Sections 2(112), 10(2)(c) and 10(2)(f); Rule 7, CGST Rules 2017; Notifications 14/2019 and 4/2022-Central Tax
Take a potter with Rs 60,00,000 of yearly sales: Rs 36,00,000 of diyas and pots, Rs 24,00,000 of terracotta decor. Composition tax is 1% of Rs 60 lakh, which is Rs 60,000. Rs 36,000 of that is tax on goods that would be nil under the regular scheme. Composition can still work for a potter whose sales are mostly taxable decor, sold locally to walk-in buyers who don't need a tax invoice. The turnover limit is Rs 1.5 crore (Notification 14/2019-Central Tax). Our composition scheme guide has the other conditions.
Income tax: Section 44AD for potters
Profit from making and selling pottery is business income. If you're a resident individual, HUF or partnership firm (not an LLP), Section 44AD of the Income-tax Act 1961 lets you skip detailed profit accounts for FY 2025-26:
- Deemed profit: 6% of turnover received by bank transfer, UPI, cheque or other digital mode, and 8% of the rest. You can declare more.
- Turnover limit: Rs 2 crore, or Rs 3 crore if cash receipts are within 5% of turnover. Your exempt diya sales count in turnover here too. GST exemption doesn't change income tax.
- No depreciation on top. Section 44AD(2) treats deductions under Sections 30 to 38 as already allowed, so your wheel, kiln and pug mill get no separate depreciation.
- Five-year lock: opt out after using 44AD and you can't return to it for the next five years (Section 44AD(4)).
From 1 April 2026 (FY 2026-27 onwards) the same scheme is in Section 58 of the Income-tax Act 2025, with the same 6% / 8% rates and Rs 2 crore / Rs 3 crore limits.
Step-by-Step Guide
Working Out Your 44AD Profit (Proprietor, FY 2025-26)
Split turnover by mode
Rs 23,00,000 total: Rs 15,00,000 by bank or UPI from traders, Rs 8,00,000 in cash at the workshop and fairs.
Check the limit
Cash is about 35% of turnover, above 5%, so the limit is Rs 2 crore. Rs 23 lakh is well within it.
Apply the rates
6% of Rs 15 lakh is Rs 90,000; 8% of Rs 8 lakh is Rs 64,000. Deemed profit: Rs 1,54,000.
Work out the tax
With no other income, Rs 1,54,000 is within Rs 12 lakh, so under the new regime the Section 87A rebate brings tax to nil.
Source: Income-tax Act 1961, Section 44AD; Income-tax Act 2025, Section 58
Asking traders to pay by UPI instead of cash cuts the deemed rate on that money from 8% to 6%. If a wet monsoon spoiled a kiln load and your real margin fell below 6%, keep full books and declare actual profit instead. Check the audit rules with your CA first. See our Section 44AD guide and the Section 87A rebate guide.
Missed the 31 August 2026 due date for AY 2026-27 (the date for business income without a tax audit)? A belated return can still be filed up to 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). Our ITR filing service handles it.
Common mistakes potters make
- Charging GST on diyas. Clay lamps and earthen pots are exempt. Charging 5% or 18% on them means collecting tax that isn't due.
- Registering when you sell only exempt goods. Section 23(1)(a) means a diya-only potter doesn't need a GSTIN. Registering just because a trader asked brings monthly returns with nothing to gain.
- Leaving diya sales out of aggregate turnover. Once you sell taxable terracotta as well, the exempt sales count towards the Rs 20 lakh or Rs 40 lakh limit.
- Claiming full credit on kiln coal. If the kiln fires both diyas and decor, part of the coal credit must be reversed under Rule 42.
- Sending handmade goods to another State without an e-way bill. The handicraft exemption saves registration, not the e-way bill. It's needed at any value.
- Picking composition without counting diyas. Composition taxes exempt diya turnover at 1%.
How Tax Garden helps potters
We first check whether you need GST registration at all, given what you sell and where. If you do, we file it through our GST registration service and set up your item master so diyas, idols, decor and tableware each carry the right HSN and rate. Every month we file GSTR-1 and GSTR-3B through our GST return filing service and work out the Rule 42 credit split. At year end we compare Section 44AD with your actual profit and file your ITR. Call or WhatsApp us on 9640290977.
Related reading: GST for candle makers, whose handcrafted candles are also on the handicraft list, GST for firecracker shops, who stock your diyas in the season, and GST for gift shops, who sell terracotta decor.
