Looking for expert help with Income tax and GST for soap and detergent 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
- Toilet soap bars and cakes are 5% GST (Notification 9/2025-CT(R), Schedule I, S. No. 251). Everything else a cleaning-products unit usually makes is 18%.
- Laundry and washing bars, liquid hand wash and body wash are 18% (Schedule II, S. No. 66). Detergent powder, dishwash and floor cleaners are 18% (S. No. 67). Phenyl and other disinfectants are 18% (S. No. 95).
- A toilet soap unit buys caustic soda, perfume and plastic wrappers at 18% and sells at 5%, so credit can pile up. Section 54(3)(ii) and Rule 89(5) let you claim it back.
- Register above Rs 40 lakh turnover (Rs 20 lakh in Telangana), or from the first sale to another State.
- 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%).
What is the GST rate on soap and detergent? Toilet soap in the form of bars, cakes or moulded shapes is taxed at 5% GST under Schedule I, S. No. 251 of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. Laundry bars, liquid hand wash, detergent powder, dishwash, floor cleaners and phenyl are all 18% under Schedule II, S. No. 66, 67 and 95 of the same notification.
Since 22 September 2025, one word decides whether a soap bar is 5% or 18%: "toilet". A bath soap goes out at 5%. The washing bar made on the same line with the same caustic soda goes out at 18%. This guide is for small soap units, detergent powder and cake makers, phenyl and floor cleaner bottlers, handmade soap brands, 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.
Soap, detergent and phenyl GST rate and HSN code
Notification 9/2025-CT(R) has one 5% entry for soap and puts the rest of the cleaning range at 18%:
Comparison
GST on Soap, Detergent and Cleaning Products from 22 September 2025
| Product | GST | Notification entry |
|---|---|---|
| Toilet soap (bath soap, handmade soap) in bars, cakes, moulded pieces or shapes | 5% | 9/2025-CT(R), Schedule I, S. No. 251 (3401) |
| Washing or laundry bars and other soap cakes that aren't toilet soap | 18% | Schedule II, S. No. 66 (3401) |
| Liquid or cream hand wash and body wash, put up for retail sale | 18% | Schedule II, S. No. 66 (3401) |
| Industrial soap | 18% | Excluded from S. No. 251; falls in Schedule II, S. No. 66 |
| Detergent powder, detergent cakes, dishwash bars and liquids, floor and toilet cleaners | 18% | Schedule II, S. No. 67 (3402) |
| Phenyl and other disinfectants | 18% | Schedule II, S. No. 95 (3808) |
| Shampoo (if you also make it) | 5% | Schedule I, S. No. 245 (3305) |
Source: Notification 9/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025. Notification 01/2026-Central Tax (Rate), the only rate notification issued in 2026 so far, amends none of these entries.
The 5% entry has three limits, all in its wording. It must be toilet soap, it must not be industrial soap, and it must be in the form of bars, cakes, moulded pieces or shapes. A bath soap meets all three. A liquid hand wash fails the third. A washing bar fails the first.
If one brand name covers both a bath soap and a washing bar, set them up as two separate items in your billing software with their own HSN and rate. Don't let the default rate carry over from one to the other.
GST on your inputs: oils, caustic soda, perfume and packing
Here's where the usual raw materials sit:
Comparison
GST on Common Soap and Detergent Inputs
| Input (HSN) | GST | Notification entry |
|---|---|---|
| Palm oil (1511) | 5% | 9/2025-CT(R), Schedule I, S. No. 88 |
| Coconut, palm kernel oil (1513) | 5% | Schedule I, S. No. 90 |
| Caustic soda, soda ash, sodium silicate and other inorganic chemicals (Chapter 28) | 18% | Schedule II, S. No. 35 |
| Organic chemicals (Chapter 29) | 18% | Schedule II, S. No. 36 |
| Perfume compounds and fragrances (3302) | 18% | Schedule II, S. No. 59 |
| Surfactants such as acid slurry, and washing preparations bought in (3402) | 18% | Schedule II, S. No. 67 |
| Industrial fatty acids (3823) | 18% | Schedule II, S. No. 109 |
| Plastic bottles, caps and pouches (3923) | 18% | Schedule II, S. No. 124 |
| Paper and paperboard cartons and boxes (4819 10, 4819 20) | 5% | Schedule I, S. No. 322 |
Source: Notification 9/2025-Central Tax (Rate), 17 September 2025. Chapter 28 is 18% except for the specific chemicals listed in Notification 10/2025-CT(R) or the other Schedules, none of which is caustic soda or soda ash.
What this means depends on what you sell:
- Detergent, phenyl and hand wash makers sell at 18% and buy mostly at 18% or less. Output tax is almost always higher than input tax, so you pay the gap in cash each month. No refund question arises.
- Toilet soap makers sell at 5%. Oils come in at 5%, but caustic soda, perfume and plastic wrappers come in at 18%. Depending on your mix and margin, credit can exceed output tax month after month.
Can a toilet soap maker claim an inverted duty refund?
Yes. Section 54(3)(ii) of the CGST Act allows a refund of unused credit where it has built up "on account of rate of tax on inputs being higher than the rate of tax on output supplies". Soap isn't on the list of goods barred from this refund (Notification 5/2017-Central Tax (Rate), as amended).
Rule 89(5) of the CGST Rules gives the formula:
Maximum refund = (Turnover of inverted rated supply x Net ITC ÷ Adjusted total turnover) - (Tax payable on the inverted rated supply x Net ITC ÷ ITC availed on inputs and input services)
"Net ITC" means credit on inputs only. Credit on input services, such as freight, repairs or rent, stays in your ledger and isn't refunded.
Example (one month, toilet soap only): a unit sells Rs 10,00,000 of bath soap, so output tax at 5% is Rs 50,000. It buys:
| Input | Value | GST rate | Credit |
|---|---|---|---|
| Palm and coconut oil | Rs 4,00,000 | 5% | Rs 20,000 |
| Caustic soda | Rs 1,00,000 | 18% | Rs 18,000 |
| Perfume compound | Rs 60,000 | 18% | Rs 10,800 |
| Plastic wrappers | Rs 80,000 | 18% | Rs 14,400 |
| Total | Rs 6,40,000 | Rs 63,200 |
Credit of Rs 63,200 is more than the Rs 50,000 output tax, so Rs 13,200 builds up. With no input services and only soap sales, the formula gives (Rs 10,00,000 x Rs 63,200 ÷ Rs 10,00,000) minus (Rs 50,000 x Rs 63,200 ÷ Rs 63,200), which is Rs 63,200 minus Rs 50,000 = Rs 13,200.
If the same unit also sells detergent at 18%, two things change: the detergent output tax uses up some of the soap credit, and the formula only refunds the share that belongs to soap turnover. Run the numbers for your own mix before filing.
Step-by-Step Guide
Claiming an Inverted Duty Refund (Toilet Soap Unit)
Confirm credit is building up
Check that your electronic credit ledger keeps growing after each GSTR-3B, and that the build-up comes from 18% inputs, not from input services.
Work out the Rule 89(5) amount
Use input credit only for Net ITC. Use your 5% soap turnover as the inverted turnover.
File the claim within two years
The time limit runs from the due date of the GSTR-3B for the period in which the claim arises (Section 54(1) and Explanation 2(e)).
Skip claims under Rs 1,000
Section 54(14) bars refunds of less than Rs 1,000, so club small months together where the rules allow.
Source: CGST Act 2017, Section 54(1), 54(3)(ii), 54(14) and Explanation 2(e); Rule 89(5), CGST Rules 2017
Do you need GST registration and e-way bills?
Two triggers, whichever comes first:
- Turnover. Section 22(1) of the CGST Act and Notification 10/2019-Central Tax set the limit for goods suppliers at Rs 40 lakh of aggregate turnover. Telangana is one of the States excluded from that limit, so a unit in Hyderabad registers at Rs 20 lakh.
- Inter-State sales. Section 24(i) makes registration compulsory for any inter-State taxable supply, whatever the turnover. One carton of soap sent to a shop in Karnataka is enough.
Example (Telangana unit, FY 2026-27): you make phenyl and floor cleaner and have sold Rs 15 lakh to shops and hostels around Hyderabad. You're under Rs 20 lakh, so registration is optional. Then a hospital chain asks for a tax invoice so it can claim credit. You'll need a GSTIN for that, and once you cross Rs 20 lakh you must register anyway. Our GST registration limit guide has the State list, and our GST registration service handles the application.
Once registered, Rule 138(1) of the CGST Rules requires an e-way bill before you move goods of consignment value above Rs 50,000. A dealer load of 40 cases of phenyl at Rs 1,200 a case is Rs 48,000 before tax and Rs 56,640 with 18% GST, so that load needs an e-way bill. Our e-way bill guide walks through the portal.
Composition or regular scheme?
Under Rule 7 of the CGST Rules, a manufacturer on composition pays 1% (0.5% CGST plus 0.5% SGST) of turnover in the State. Soap, detergent and phenyl aren't on the list of goods whose makers are barred from composition (Notification 14/2019-Central Tax), and the turnover limit is Rs 1.5 crore in the preceding year.
Comparison
Composition vs Regular GST for a Soap or Phenyl Maker
| Point | Composition (manufacturer) | Regular scheme |
|---|---|---|
| Tax rate | 1% of turnover in the State | 5% on toilet soap, 18% on everything else |
| Credit on oils, caustic soda, perfume, packing | Not allowed | Allowed |
| Inverted duty refund | Not available | Available under Rule 89(5) |
| Your buyer's credit | Not available; you can't charge GST | Available on your tax invoice |
| Sales to other States | Not allowed (Section 10(2)(c)) | Allowed |
Source: CGST Act 2017, Sections 10(1) and 10(2)(c); Rule 7, CGST Rules 2017; Notification 14/2019-Central Tax
Example: a phenyl and floor cleaner unit with Rs 60 lakh turnover, selling to local households and small shops, pays Rs 60,000 for the year at 1%. That can work when buyers don't need credit. It doesn't suit a unit supplying hospitals, hotels, housekeeping contractors or distributors, because they want an 18% tax invoice. And a toilet soap maker with a credit build-up loses the refund route entirely on composition. Our composition scheme guide covers the other conditions.
Income tax: Section 44AD for soap and detergent makers
Profit from making and selling soap or cleaning products 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.
- No depreciation on top. Section 44AD(2) treats deductions under Sections 30 to 38 as already allowed, so your mixer, plodder, stamping machine or filling line gets 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 80,00,000 total: Rs 72,00,000 by bank or UPI, Rs 8,00,000 in cash.
Check the limit
Cash is 10% of turnover, above 5%, so the limit is Rs 2 crore. Rs 80 lakh is within it.
Apply the rates
6% of Rs 72 lakh is Rs 4,32,000; 8% of Rs 8 lakh is Rs 64,000. Deemed profit: Rs 4,96,000.
Work out the tax
With no other income, Rs 4,96,000 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
Moving the Rs 8 lakh of cash sales to UPI would cut the deemed rate on that money from 8% to 6%, and keep cash within 5% if you later grow past Rs 2 crore.
If your real margin is below 6%, for example in a year when oil prices jumped and you couldn't pass them on, keep full books and claim actual profit with depreciation. 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).
Common mistakes soap and detergent makers make
- Billing washing bars at 5%. Only toilet soap gets 5%. A laundry or washing bar is 18%.
- Treating hand wash like soap. Liquid or cream skin-washing products for retail sale are 18%, even from a soap brand.
- Leaving inverted credit in the ledger. A toilet soap unit with a growing credit balance can claim it under Rule 89(5), but only within two years of the GSTR-3B due date for that period.
- Counting service credit in the refund. Net ITC in Rule 89(5) covers inputs only. Freight and repair credit isn't refunded.
- Choosing composition with institutional buyers. Hospitals, hotels and distributors want a GST invoice they can claim credit on.
- Claiming depreciation under 44AD. Section 44AD(2) already treats it as allowed.
How Tax Garden helps soap, detergent and phenyl makers
We check whether you need to register, get you registered through our GST registration service, and set up your item master so bath soap, washing bars, hand wash and phenyl each carry the right HSN and rate. Every month we file GSTR-1 and GSTR-3B through our GST return filing service, and we work out and file inverted duty refunds where your credit is piling up. At year end we compare Section 44AD against actual profit and file your ITR through our ITR filing service. Call or WhatsApp us on 9640290977.
Related reading: GST for FMCG distributors and stockists, who carry your soap to retailers, GST for cosmetics shops, and GST for agarbatti makers, another 5% product with 18% inputs.
