Looking for expert help with Income tax and GST for spice and masala traders 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
- Dried chillies, chilli powder, pepper, cardamom, cumin, coriander seed, dry ginger, turmeric powder and blended masala are all 5% GST from 22 September 2025 (Notification 9/2025-Central Tax (Rate), Schedule I).
- Fresh ginger, fresh turmeric and fresh green chillies are nil-rated, and so are spice seeds of seed quality (Notification 10/2025-Central Tax (Rate)).
- Registration kicks in above Rs 40 lakh in most States, but Rs 20 lakh in Telangana. Composition is open up to Rs 1.5 crore at 1% of taxable turnover, with no inter-State sales.
- Section 44AD covers traders up to Rs 2 crore, or Rs 3 crore if cash receipts stay within 5%. Deemed profit is 6% of digital and 8% of cash turnover.
- Cash paid to the farmer who grew the produce is outside the Rs 10,000 limit of Section 40A(3) (Rule 6DD(e)). Cash paid to another trader isn't.
What is the GST rate on spices in India? Dried and ground spices, including chilli powder, turmeric powder, pepper, cardamom, cumin and mixed masala, attract 5% GST (2.5% CGST plus 2.5% SGST) from 22 September 2025 under Notification 9/2025-Central Tax (Rate). Fresh ginger, fresh turmeric and fresh green chillies are nil-rated under Notification 10/2025-Central Tax (Rate).
A spice business sits on a line most other traders don't have to think about: the same turmeric is tax-free when it comes off the field and 5% once it's boiled, dried or ground. Add farmers who want cash, buyers who deduct TDS, and a registration limit that changes from State to State, and the compliance gets busy fast. This guide is for wholesale and retail spice traders and small masala grinding units. 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 new section numbers that apply from 1 April 2026.
Which spices are 5% and which are nil?
The test is simple: fresh is nil, dried or processed is 5%. The GST rate overhaul of 22 September 2025 put the whole spice chapter (0904 to 0910) in the 5% schedule and kept only the fresh and seed-quality items in the nil list.
Comparison
GST on Spices from 22 September 2025
| Product (HSN) | GST | Notification entry |
|---|---|---|
| Pepper; dried, crushed or ground chillies (0904) | 5% | 9/2025-CT(R), Schedule I, S. No. 36 |
| Vanilla (0905) | 5% | 9/2025-CT(R), Schedule I, S. No. 37 |
| Cinnamon (0906) | 5% | 9/2025-CT(R), Schedule I, S. No. 38 |
| Cloves (0907) | 5% | 9/2025-CT(R), Schedule I, S. No. 39 |
| Nutmeg, mace, cardamom (0908) | 5% | 9/2025-CT(R), Schedule I, S. No. 40 |
| Cumin, coriander, fennel, anise seeds, not of seed quality (0909) | 5% | 9/2025-CT(R), Schedule I, S. No. 41 |
| Dry ginger, saffron, dried or ground turmeric, bay leaves, curry and other spices (0910) | 5% | 9/2025-CT(R), Schedule I, S. No. 42 |
| Mixed condiments and mixed seasonings, curry paste (2103) | 5% | 9/2025-CT(R), Schedule I, S. No. 139 |
| Fresh ginger, not processed (0910 11 10) | Nil | 10/2025-CT(R), S. No. 60 |
| Fresh turmeric, not processed (0910 30 10) | Nil | 10/2025-CT(R), S. No. 61 |
| Fresh green chillies and other fresh vegetables (0709) | Nil | 10/2025-CT(R), S. No. 35 |
| Cumin, coriander, fennel and other 0909 seeds of seed quality | Nil | 10/2025-CT(R), S. No. 59 |
Source: Notifications 9/2025 and 10/2025-Central Tax (Rate), 17 September 2025, in force 22 September 2025; 9/2025-Integrated Tax (Rate) for 5% IGST
Inter-State sales of the 5% items carry 5% IGST (Notification 9/2025-Integrated Tax (Rate), Schedule I, same serial numbers). Packing doesn't change these rates. A 100 g branded pouch of chilli powder and a 50 kg loose bag both sit at 5%, and the nil entries for fresh ginger and turmeric have no carve-out for packed goods.
One old argument is now dead. Blended masala could be read as a spice mixture (0910) or as a mixed seasoning (2103), and the two used to carry different rates. Both are in Schedule I now, so the classification no longer changes the tax.
Example: a wholesaler in Guntur sells a Hyderabad hotel 50 kg of chilli powder at Rs 300 per kg and 200 kg of fresh green chillies at Rs 40 per kg.
- Chilli powder: Rs 15,000 plus 5% GST of Rs 750. Guntur to Hyderabad crosses a State line, so the whole Rs 750 is IGST. Within one State it would be Rs 375 CGST plus Rs 375 SGST.
- Green chillies: Rs 8,000, no GST.
- Bill total: Rs 23,750.
Do you need GST registration, and is composition worth it?
Registration. Section 22(1) of the CGST Act sets the limit at Rs 20 lakh of aggregate turnover (Rs 10 lakh in special category States). Notification 10/2019-Central Tax lifts it to Rs 40 lakh for anyone supplying only goods, but not for intra-State suppliers in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand. So a Warangal chilli trader registers at Rs 20 lakh. A Guntur trader across the border in Andhra Pradesh registers at Rs 40 lakh.
Two points trip spice traders up:
- If you sell only nil-rated goods, such as fresh ginger and turmeric straight from the farm, you don't need to register at all (Section 23(1)(a), CGST Act).
- Once you sell anything taxable, the threshold counts your aggregate turnover, which includes exempt supplies (Section 2(6)). Rs 15 lakh of fresh turmeric plus Rs 10 lakh of turmeric powder is Rs 25 lakh, over the Telangana limit.
Sell taxable spices to a buyer in another State and you must register whatever your turnover (Section 24(i)). Our GST registration threshold guide has the full State list.
Composition. If your turnover in the previous year was up to Rs 1.5 crore, you can pay a flat rate instead of 5% (Notification 14/2019-Central Tax). Under Rule 7 of the CGST Rules, a trader pays 0.5% CGST plus 0.5% SGST on its taxable turnover in the State, so nil-rated fresh produce costs nothing. A grinding unit counts as a manufacturer and pays the same 1% on its turnover. The conditions (Section 10, CGST Act):
- No inter-State sales.
- You can't charge GST on your bills or claim input tax credit (Section 10(4)).
Example: a retail spice shop had FY 2025-26 aggregate turnover of Rs 1.3 crore, of which Rs 30 lakh was fresh ginger and turmeric. It qualifies. Composition tax on the Rs 1 crore taxable turnover is Rs 1,00,000 for the year (Rs 50,000 CGST and Rs 50,000 SGST). Under the regular scheme it would charge 5% on that Rs 1 crore, Rs 5,00,000 collected from customers, and set its input tax credit against it.
Composition suits a shop that sells to households. It's a poor fit for a wholesaler whose hotel, caterer and masala-company buyers want a tax invoice to claim credit. See our composition scheme guide, or let our GST registration service set it up the right way from day one.
The monthly GST routine for a spice business
Step-by-Step Guide
Monthly GST Routine for a Spice Trader
Split sales into nil and 5%
Tag fresh ginger, fresh turmeric and green chillies as nil-rated and every dried, ground or blended line at 5%. Both go into GSTR-1.
Generate e-way bills
Movement of goods with a consignment value above Rs 50,000 needs an e-way bill before the truck leaves (Rule 138, CGST Rules).
Match input tax credit
Claim ITC on packing material, grinding machine repairs, freight and purchases from registered dealers, matched against your GSTR-2B.
Reverse credit on exempt sales
Where common inputs serve both nil and 5% sales, the share used for exempt sales can't be claimed (Section 17(2), CGST Act).
File GSTR-1 and GSTR-3B
Report outward supplies in GSTR-1 and pay the net tax through GSTR-3B.
Source: CGST Act 2017, Sections 10, 16, 17; Rule 138, CGST Rules 2017
Most spice traders buy from farmers, who are unregistered, so there's no GST on those purchases and no credit either. Credit builds up from packing pouches, freight, warehouse rent and machinery. If you'd rather hand off the monthly work, our GST return filing service does the nil and 5% split and the GSTR-2B match each month.
Income tax: 44AD, books and audit
A spice trader buying and selling on its own account is a business. A resident individual, HUF or partnership firm (not an LLP) can use Section 44AD if turnover is up to Rs 2 crore, or Rs 3 crore where cash receipts don't exceed 5% of turnover. Deemed profit is 6% of turnover received by bank transfer, UPI or account payee cheque (by the ITR due date) and 8% of the rest.
A mandi commission agent who only earns commission on spice auctions can't use it. Section 44AD(6) excludes commission or brokerage income and agency business.
Example (proprietor, new tax regime, FY 2025-26, no other income): turnover Rs 2,60,00,000, of which Rs 10,00,000 came in cash from small retailers. Cash is 3.85% of turnover, so the Rs 3 crore limit applies.
- 6% of Rs 2,50,00,000 = Rs 15,00,000.
- 8% of Rs 10,00,000 = Rs 80,000.
- Deemed profit: Rs 15,80,000.
- Tax: Rs 4-8 lakh at 5% = Rs 20,000; Rs 8-12 lakh at 10% = Rs 40,000; Rs 12-15.8 lakh at 15% = Rs 57,000. Total Rs 1,17,000.
- Income is above Rs 12 lakh, so there's no Section 87A rebate. Add 4% Health and Education Cess of Rs 4,680. Total: Rs 1,21,680.
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)(iii), Income-tax Act 1961 as amended by Finance Act 2025
Wholesale spice margins can be thinner than 6%, especially in chillies where prices swing through the season. You can declare actual profit instead, but keep the trap in mind. If you used 44AD in any of the previous five years and now declare less, Section 44AD(4) shuts you out of 44AD for the next five years. Section 44AD(5) then needs books and an audit whenever income is above the basic exemption limit.
Outside 44AD, the audit limit under Section 44AB(a) is Rs 1 crore, rising to Rs 10 crore when cash receipts and cash payments are each within 5%. Paying farmers in cash can push you over that 5% payment line even if every sale is digital.
Missed the AY 2026-27 deadline? 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 up to Rs 5 lakh (Section 234F). Our Section 44AD guide has more, and our ITR filing service handles the return.
From FY 2026-27 the Income-tax Act 2025 applies. Presumptive tax moves to Section 58 (Table, S. No. 1) and the audit limits to Section 63, with the same rupee figures.
Cash to farmers, cash from buyers, and TDS
Paying farmers. Section 40A(3) disallows any expense where you pay one person more than Rs 10,000 in cash in a day. Rule 6DD(e) of the Income-tax Rules 1962 carves out payments for agricultural produce, or products of horticulture, made to the cultivator, grower or producer. So Rs 60,000 in cash to the farmer who grew the turmeric stays deductible. Rs 60,000 in cash to another trader or a commission agent for the same turmeric doesn't. Keep the farmer's name, village and a signed receipt for every cash purchase. From 1 April 2026 the Rs 10,000 limit is Section 36(4) of the 2025 Act.
The Rs 2 lakh ceiling. Section 269ST bars anyone from receiving Rs 2 lakh or more in cash from one person in a day, for a single transaction, or for one event. It binds the farmer when you pay and binds you when a retailer pays. The penalty under Section 271DA equals the amount received. Under the 2025 Act these are Sections 186 and 451. See our cash limits guide.
194Q on your sales. A masala company or food processor whose turnover exceeded Rs 10 crore in the previous year deducts 0.1% on what it pays you above Rs 50 lakh in the year. Say a buyer with Rs 25 crore turnover in FY 2025-26 buys Rs 1.2 crore of dried chillies from you in FY 2026-27. TDS is 0.1% of Rs 70 lakh, or Rs 7,000, now under Section 393(1), Table S. No. 8(ii), of the 2025 Act. Claim it from Form 26AS or AIS. The seller-side TCS under Section 206C(1H) stopped applying from 1 April 2025 (Finance Act 2025). If your own turnover crossed Rs 10 crore, you're the one deducting on large purchases. Our Section 194Q guide covers it.
Common mistakes spice traders make
- Charging nil on dried turmeric or dry ginger. The nil entries cover only fresh, unprocessed ginger and turmeric. Once boiled and dried, it's 5%.
- Using the Rs 40 lakh limit in Telangana. Telangana is outside Notification 10/2019-Central Tax. The limit there is Rs 20 lakh.
- Leaving fresh produce out of turnover. Exempt sales count toward the registration and composition limits even though no tax is due on them.
- Paying middlemen in cash. Rule 6DD(e) protects cash paid to the grower only. Cash above Rs 10,000 a day to a trader or agent is disallowed.
- Opting for composition while selling to other States. One inter-State sale breaks the composition conditions.
How Tax Garden helps spice traders
We tag every sale as nil or 5%, check your composition eligibility against the right State limit, and file GSTR-1 and GSTR-3B through our GST return filing service. At year end we test 44AD against your real margin, separate farmer cash from trader cash for Section 40A(3), and claim 194Q credits through our ITR filing service. See pricing for plans.
