GST for rice mills is deceptively tricky: the same grain is exempt as paddy, exempt as loose rice, but taxable as a branded packet — and your by-products each have their own treatment. This guide lays out the landscape so you can bill correctly and avoid surprises.
This is general information, not tax advice. GST rates, HSN classifications, and notifications change — always confirm the current position for your specific products with your chartered accountant.
The quick reference table
| Item | HSN | GST (general position) |
|---|---|---|
| Paddy (raw, in husk) | 1006 10 | Exempt (nil) |
| Brown / husked rice | 1006 20 | Nil-rated |
| Rice — loose / unbranded | 1006 30 | 0% (nil) |
| Rice — pre-packaged & labelled | 1006 30 | 5% |
| Broken rice — pre-packaged & labelled | 1006 40 | 5% |
| Rice husk | 2302 | Exempt (generally) |
| Rice bran | 2302 40 | Taxable (commonly 5%; varies) |
The pre-packaged rule is the big one
Since July 2022, the GST line for rice isn't "branded vs unbranded" — it's pre-packaged and labelled. Rice sold loose is nil-rated; the same rice in a pre-packaged, labelled pack (of the kind covered by the Legal Metrology rules) attracts 5% GST. For a mill that sells both ways, that means the same product is taxed differently by how it's packed — your billing has to get this right per invoice.
By-products: each has its own treatment
- Husk — generally exempt.
- Bran — taxable (commonly 5%); classification differs for de-oiled bran / cattle-feed grades, so confirm your exact product.
- Broken rice — follows the same pre-packaged/loose logic as rice.
Because your by-products carry different GST, booking them as separate stock and sales items isn't just good accounting — it's what makes correct GST billing possible.
Milling charges (custom milling / job work)
When you mill the government's paddy under CMR, you're supplying a service (job work, SAC 9988), and the milling charges generally attract GST (commonly 5%). The treatment of custom milling has been the subject of tax rulings, so confirm the current position — it's separate from the GST on any rice you sell on your own account.
The input tax credit trap
Here's the catch that surprises mills: if a large share of your output is exempt (loose/unbranded rice, husk), you generally cannot claim full input tax credit (ITC) on your inputs — ITC has to be apportioned, and the exempt portion is a cost. Mills that sell mostly loose rice often can't recover GST on packing material, power equipment, or services the way a fully-taxable business can. Knowing your taxable-vs-exempt sales mix — which your software should tell you at a glance — is essential for both compliance and pricing.
How software keeps GST clean
Correct rice-mill GST needs the right HSN and rate per item, the pre-packaged-vs-loose distinction on every sale, separate handling of each by-product, e-invoicing where applicable, and a clear taxable/exempt split for ITC. That's a lot to do by hand across procurement, milling, and sales — and exactly what an ERP built for mills handles as part of normal billing.
Bill GST correctly across paddy, rice & by-products
Millingo carries the right HSN/rate per item, distinguishes pre-packaged from loose sales, books by-products separately, and keeps your CMR and open-market billing straight. Explore Millingo → or book a free consultation.
Frequently asked questions
Is there GST on paddy?
Raw paddy (HSN 1006 10) is exempt (nil-rated), so it moves and stores without GST.
What is the GST rate on rice?
Loose/unbranded rice is nil-rated; pre-packaged and labelled rice attracts 5% GST (the pre-packaged rule from July 2022).
Can a rice mill claim full input tax credit?
Not if a large share of output is exempt. ITC must be apportioned between taxable and exempt sales, and the exempt portion becomes a cost — so your sales mix matters. Confirm specifics with your CA.