GST on Handicrafts: Tax Rates, Benefits, and Compliance Guide

GST on handicrafts is a significant contributor to India’s economy, with over 7 million artisans employed across the country. The government has introduced concessional GST rates for handicrafts. It boosts sales by easing compliance with GST on handicraft products. Read on to know more about the taxation of handicrafts under the GST law.

Key Takeaways

• Handicraft items attract GST of 5% or 12% for most items as per the material used.
• Textiles woven by hand, and some wood-carved/stone-carved handicrafts are exempted from GST.
• The GST law makes it mandatory to generate an e-way bill for the interstate movement of handicraft goods, even if the supplier is exempt from registration.

GST Rates on Handicrafts

Handicraft items attract GST ranging from 5% to 12%. Some items, like imitation jewellery, have only 3% tax. This small tax helps artisans and small businesses keep prices low, and that brings more customers.

These rates are helpful for those who make these things by hand, especially in rural or small-town areas where big taxes can be a real challenge.

GST Exemptions for Handicraft

The Goods and Services Tax framework provides relief to certain categories of handicraft suppliers. The rule applies mainly to casual taxable persons who sell handicraft items across state borders.

• Suppliers of Handicraft Goods- One category includes suppliers who make interstate supplies of handicraft goods described in Notification No. 21/2018. These goods cover several traditional items under specific tariff headings. The list contains textiles woven by hand, carpets, durries, zari threads, and similar craft-based products.
• Craft Products Made Predominantly by Hand- Another category covers products created mostly by hand, even if some machines assist in the process. Examples include leather bags, footwear, carved wood articles, carved stone products, bamboo crafts, paper-mache, clay pottery, brassware, bidriware, musical instruments, and conch shell work. Dolls, toys, and folk paintings such as Madhubani, Pattachitra, and Rajasthani miniatures also fall within this group.
• Conditions Attached- The exemption remains valid only when total turnover on an all-India basis stays within the threshold mentioned in Section 22 of the CGST Act. The artisan or supplier must also hold a Permanent Account Number and generate e-way bills as required. In addition, the person must use the benefit of Notification No. 03/2018 on Integrated Tax.

E-way Bill Rules for Handicraft

The GST law makes it mandatory to generate an e-way bill for the interstate movement of handicraft goods, even if the supplier is exempt from registration. This special rule ensures that the movement of handicrafts is tracked properly while still giving artisans relief from compulsory registration. The requirement applies to all consignments, regardless of their value, when they involve interstate trade of handicraft items.

GST Registration for Handicraft Sellers

If a craftsman sells handicrafts making less than Rs.20 lakh annually need not register under GST. The threshold limit for GST registration varies across the north-eastern states and UTs. It means they can focus on growing their handicraft business without having to deal with many forms and compliance. However, if they exceed the threshold limit or utilise e-commerce platforms such as Amazon or Flipkart, then GST registration becomes necessary.

Benefits of Concessional GST Rates on Handicraft

There are certain benefits that you can get from GST if you are an artisan. First, lower tax rates mean artisans keep more money. Then, customers pay less, so sales go up. Also, since the tax rules are the same in every state, artisans can sell in any part of India without extra papers or trouble.