Looking for expert help with Tea GST rate and HSN code? 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
- Tea of HSN 0902, loose or packed, branded or not, is 5% GST (Notification 9/2025-CT(R), Schedule I, S. No. 34) from 22 September 2025.
- Unprocessed green tea leaf is exempt (Notification 10/2025-CT(R), S. No. 58). A grower selling only green leaf needn't register.
- Instant tea and tea premixes (2101 20) dropped from 18% to 5% on 22 September 2025 (S. No. 136).
- Plastic pouches (3923) are 18%, so packers often build up excess credit. Tea isn't barred from inverted duty refunds.
- Estates that grow and make their own tea pay income tax on only 40% of that income (Rule 8, 1962 Rules; Rule 271, Rules 2026). Profit on bought leaf is fully taxable.
What is the GST rate and HSN code for tea? Tea falls under HSN 0902 and attracts 5% GST (2.5% CGST plus 2.5% SGST) under Schedule I, S. No. 34 of Notification 9/2025-Central Tax (Rate), in force from 22 September 2025. The rate is the same for CTC, orthodox, green and flavoured tea, loose or packaged. Unprocessed green tea leaf is exempt (Notification 10/2025-CT(R), S. No. 58).
The tea rate is the easy bit. Everything else in the tea trade sits on top of it. A bought-leaf factory pays hundreds of small growers for exempt green leaf, often in cash. A packer buys made tea at 5%, packs it in 18% pouches and watches credit pile up. An estate that grows and makes its own tea has a special income-tax split that most CAs outside the tea belt rarely see. This post covers GST rates, registration, composition, refunds of excess credit, and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 and Rules 2026 provisions that apply from 1 April 2026. It's written for tea packers, blenders, wholesalers, bought-leaf factories, estate owners and the CAs who file for them. If you mainly trade spices or run a general provisions wholesale business, our spice and masala traders guide or FMCG distributors guide may fit better.
What GST rate applies to tea and the things you buy?
Your output is almost all 5%. Your inputs aren't. Notification 9/2025-Central Tax (Rate), in force from 22 September 2025, sets the rates below.
Tax Rate Chart
GST on Tea and Common Tea-Business Inputs (from 22 September 2025)
Unprocessed green leaves of tea (0902)
Notification 10/2025-CT(R), S. No. 58
Tea, whether or not flavoured: CTC, orthodox, green, loose or packed (0902)
Schedule I, S. No. 34
Instant tea, tea extracts and premixes with a tea base (2101 20)
Schedule I, S. No. 136 (was 18%)
Paper or paperboard cartons and boxes (4819 10, 4819 20)
Schedule I, S. No. 322
Wooden packing cases and tea chests (4415)
Schedule I, S. No. 300
Plastic pouches and other plastic packing articles (3923)
Schedule II, S. No. 124
Coal used as factory fuel (2701)
Schedule II, S. No. 23
Machinery of headings 8419 and 8438, such as dryers and food-processing machines
Schedule II, S. Nos. 408 and 425
Source: CBIC Notification 9/2025-Central Tax (Rate) and Notification 10/2025-Central Tax (Rate), both dated 17 September 2025, in force 22 September 2025
Brand doesn't matter. Some goods carry a different rate when pre-packaged and labelled. Tea doesn't. The 0902 entry reads "Tea, whether or not flavoured [other than unprocessed green leaves of tea]", so loose tea sold from a sack and a branded 250 g pack are both 5%.
Green tea isn't green leaf. Green tea is made tea, dried and processed, and it's 5% like any other 0902 tea. The exemption is only for unprocessed green leaves, the fresh leaf a grower plucks and sends to the factory.
Instant tea and premixes. Extracts, essences and concentrates of tea, and preparations with a tea base, sit in sub-heading 2101 20. That entry moved from 18% to 5% on 22 September 2025. If you make tea premix sachets, check that your billing software picked up the change; invoices dated before 22 September 2025 correctly show 18%.
Tea stalls and cafés. Serving a cup of tea is a restaurant service, not a sale of tea of heading 0902. Our restaurant GST guide covers that.
Who needs GST registration in the tea trade?
Small growers. A grower who sells only green leaf supplies exempt goods. Section 23(1)(a) of the CGST Act says a person supplying only exempt goods isn't liable to register, and Section 23(1)(b) separately covers an agriculturist selling produce out of cultivation of land.
Factories, packers and traders. Made tea is taxable, so the normal limits apply. A business supplying only goods can wait until aggregate turnover crosses Rs 40 lakh under Notification 10/2019-Central Tax. That notification doesn't apply to intra-State suppliers in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand, where the Section 22(1) limits of Rs 20 lakh, or Rs 10 lakh in some special category States, apply instead. Assam, West Bengal, Kerala, Tamil Nadu and Karnataka aren't on that list. Our registration limit guide has the detail. If you sell to buyers in other States, Section 24 requires registration from the first inter-State sale, whatever your turnover. Our GST registration service files the application.
Composition. Tea isn't on the composition barred list in Notification 14/2019-Central Tax (which names ice cream, pan masala and tobacco). If last year's turnover was up to Rs 1.5 crore (Rs 75 lakh in the eight States the notification names), you can pay 0.5% CGST plus 0.5% SGST under Rule 7 of the CGST Rules. The catch for tea is Section 10(2)(c): a composition dealer can't make any inter-State sale. Most packers and auction buyers sell across State lines, so composition suits only a purely local trader. Our composition scheme guide explains the other conditions.
Packers: why credit piles up and how to get it back
A packer buys made tea at 5%, but pays 18% on plastic pouches and laminates. Output tax is 5% on everything you sell. In a month with heavy pouch buying, the credit can exceed the tax you owe.
Example: a packer in a month buys made tea worth Rs 10,00,000 (GST Rs 50,000), plastic pouches worth Rs 1,50,000 (GST at 18%, Rs 27,000) and cartons worth Rs 50,000 (GST at 5%, Rs 2,500). It sells packed tea worth Rs 15,00,000 (GST at 5%, Rs 75,000).
| Item | Amount |
|---|---|
| Output tax on sales (5% of Rs 15,00,000) | Rs 75,000 |
| Credit on made tea | Rs 50,000 |
| Credit on plastic pouches | Rs 27,000 |
| Credit on cartons | Rs 2,500 |
| Total credit | Rs 79,500 |
| Excess credit carried forward | Rs 4,500 |
Month after month, Rs 4,500 becomes a real sum locked in your electronic credit ledger. Section 54(3)(ii) of the CGST Act allows a refund of unused credit that builds up because inputs carry a higher rate than output. Notification 5/2017-Central Tax (Rate) lists goods barred from this refund, mostly certain fabrics and edible oils, and tea isn't on it.
The refund is worked out with the Rule 89(5) formula: (inverted turnover x Net ITC / adjusted total turnover) minus (tax on inverted turnover x Net ITC / ITC on inputs and input services). "Net ITC" means credit on inputs only. Credit on capital goods such as packing machines, and on input services such as transport or warehousing, doesn't count. In the example, with no input services and all sales at 5%, the maximum refund is Rs 79,500 x 15,00,000 / 15,00,000 minus Rs 75,000 x 1, which is Rs 4,500. Our inverted duty refund guide walks through the filing.
Bought-leaf factories are different. Green leaf is exempt, so you get no credit on your biggest purchase. Your credit comes from coal, packing, machinery and services. Coal is 18%, so a factory burning a lot of it can still build up excess credit, but only the credit on inputs such as coal and packing counts towards a refund.
E-way bills. Rule 138(1) of the CGST Rules requires an e-way bill before moving goods worth more than Rs 50,000. Two hundred kilograms of made tea at Rs 300 a kilo is Rs 60,000, so most factory dispatches and auction lots need one. Some States set their own limit for movement within the State; see our State-wise e-way bill limits.
Step-by-Step Guide
Setting Up GST for a Tea Packing or Trading Business
Map your HSN codes
Made tea 0902 at 5%, instant tea and premixes 2101 20 at 5%, green leaf 0902 exempt. Keep a separate code for any non-tea items you trade.
Check registration and composition
Register above Rs 40 lakh (Rs 20 lakh in Telangana and other opted-out States), or from your first inter-State sale. Composition only works if you sell within your State.
Track credit by input type
Separate credit on inputs (made tea, pouches, cartons, coal) from credit on capital goods and services, because only input credit counts for a refund.
Generate e-way bills
Any consignment above Rs 50,000, including stock moved to a godown or a broker's warehouse.
Claim refunds when credit piles up
If your ledger keeps growing, file an inverted duty refund using the Rule 89(5) formula instead of carrying the balance forward.
Source: Notifications 9/2025-CT(R), 10/2025-CT(R), 5/2017-CT(R), 10/2019-CT and 14/2019-CT; CGST Act Sections 10, 22, 23, 24 and 54(3); CGST Rules 7, 89(5) and 138
Income tax for tea estates: the 40% rule
If you grow tea and manufacture it in your own factory, part of your income is agricultural and part is business. The Rules fix the split instead of leaving you to argue it.
The rule. Income from the sale of tea grown and manufactured by the seller in India is computed as if it were business income, and 40% of it is taxable. The other 60% is agricultural income. For FY 2025-26 this is Rule 8 of the Income-tax Rules 1962. From 1 April 2026 it's Rule 271(1), Table Sl. No. 4 of the Income-tax Rules 2026, at the same 40%.
Example: an individual owns an estate and factory. For FY 2025-26 the profit from tea grown and made on the estate, computed as business income, is Rs 25,00,000. Taxable business income is 40%, so Rs 10,00,000. The remaining Rs 15,00,000 is agricultural income. It isn't taxed directly, but for an individual or HUF it can push the Rs 10,00,000 into a higher slab under the partial integration rules. Our agricultural income guide shows that calculation.
Bought leaf isn't covered. The rule applies only to tea the seller both grew and made. Many estate factories also buy leaf from small growers. Profit on tea made from bought leaf is ordinary business income, taxed in full. The rule doesn't give an allocation method, so keep separate records of leaf received from your own gardens and leaf bought, and agree a reasonable basis with your CA before you file.
Replanting. In computing that income, you can deduct the cost of planting bushes to replace bushes that have died or become permanently useless in an area already planted, as long as the area hasn't been abandoned (Rule 8(2); Rule 271(2)). A subsidy from the Tea Board that's exempt from tax isn't deducted from that cost. The subsidy exemption is Section 10(30) of the 1961 Act and Schedule III, Table Sl. No. 21 of the 2025 Act.
Tea development account. A business that grows and manufactures tea in India can deduct money deposited in a special account with NABARD under a Tea Board scheme, or in a Tea Board deposit account. The deduction is the amount deposited or 40% of the business profit (before this deduction), whichever is less. Three conditions apply:
- the deposit is made within six months of the end of the year, or before the return due date if that's earlier;
- the accounts are audited by an accountant before the tax audit due date; and
- the audit report is filed in Form No. 3AC for FY 2025-26 (Section 33AB of the 1961 Act, Rule 5AC). From 1 April 2026 the provision is Section 48 with Schedule IX of the 2025 Act, and the report is Form No. 182 (Rule 290 of the Rules 2026).
Money withdrawn from the account and not used for the scheme's purposes becomes taxable in the year of withdrawal.
Income tax for packers, traders and bought-leaf factories
Section 44AD. For FY 2025-26, a resident individual, HUF or partnership firm (not an LLP) can declare 6% of turnover received by bank transfer, UPI or account payee cheque (by the return due date) and 8% of the rest as profit under Section 44AD of the Income-tax Act 1961. The limit is Rs 2 crore of turnover, or Rs 3 crore if cash receipts are within 5% of turnover. From 1 April 2026 the same scheme is Section 58(2), Table Sl. No. 1, of the Income-tax Act 2025, with the same rates and limits.
Example: a proprietor's tea packing unit has FY 2025-26 turnover of Rs 1,50,00,000: Rs 1,40,00,000 by bank and UPI and Rs 10,00,000 in cash. Cash is 6.67% of turnover, above 5%, so the limit is Rs 2 crore, and the unit is within it. Deemed profit is 6% of Rs 1,40,00,000 (Rs 8,40,000) plus 8% of Rs 10,00,000 (Rs 80,000), so Rs 9,20,000. Packing margins are thin, so compare that with your books before you decide. Our Section 44AD guide explains the five-year lock-in if you opt out.
Paying growers in cash. A business expense paid in cash above Rs 10,000 to one person in a day is normally disallowed (Section 40A(3) of the 1961 Act; Section 36(4) of the 2025 Act). Payment for agricultural produce made to the cultivator, grower or producer is an exception: Rule 6DD(e) of the 1962 Rules for FY 2025-26 and Rule 26(1)(e) of the Rules 2026 from 1 April 2026. A bought-leaf factory paying a small grower Rs 18,000 in cash for a week's leaf is covered. The same payment to a leaf agent who collects from several growers isn't, and the whole Rs 18,000 would be disallowed. Pay agents by bank transfer or UPI. Keep the grower's name, village and a signed receipt for every cash purchase. The exception only protects your deduction: a cash payment of Rs 2,00,000 or more to one grower in a day still breaks Section 269ST for the grower who receives it.
Cash you receive. Under Section 269ST of the 1961 Act (Section 186 of the 2025 Act), you can't receive Rs 2,00,000 or more in cash from one person in a day, for one transaction, or for one event. A wholesaler collecting from a retailer for a large festival order can cross it. The penalty equals the amount received (Section 271DA of the 1961 Act; Section 451 of the 2025 Act). Our cash transaction limits guide covers both sides.
Common mistakes in the tea trade
- Treating green tea as green leaf. Only unprocessed leaf is exempt; green tea is 5%.
- Billing instant tea or premix at 18% after 22 September 2025. It's 5% now.
- Carrying excess credit for years. Tea isn't barred from inverted duty refunds; claim it.
- Opting for composition while selling to other States. Section 10(2)(c) rules it out.
- Applying the 40% rule to bought-leaf tea. Rule 8 and Rule 271 cover only tea you grew and made.
- Paying leaf agents in cash. The cash exception covers the grower, not a middleman.
How Tax Garden helps tea businesses
We map your HSN codes, separate credit on inputs from credit on services and machinery so a refund claim holds up, and file GSTR-1 and GSTR-3B every month through our GST return filing service. For estates, we keep own-leaf and bought-leaf records apart, work out the 40% split and the tea development deduction, and file your ITR through our ITR filing service. Our accounting and bookkeeping service keeps grower payments and cash limits in order through the year. Call or WhatsApp us on 9640290977.
Related reading: GST and income tax for honey processors, GST and income tax for jaggery units, GST and income tax for paper bag and plastic bag makers and the item-wise GST rates list.
