This is the reference detail behind our Rice Mills page: GST, hulling for government agencies, and cash payments, and cost records.
A rice mill works on a thin margin per quintal. The result turns on how much head rice each quintal of paddy gives and on what the bran, brokens and husk fetch. It also turns on the cost of holding paddy bought in a few weeks and milled over months.
GST on rice, by-products and milling
| Item | GST |
|---|---|
| Rice sold loose, or in a single package above 25 kg | Nil |
| Rice that is pre-packaged and labelled, in packs up to 25 kg | 5% |
| Rice bran | 5% |
| Husk | Nil |
| Rice bran oil | 5% |
| Milling paddy for someone else | 5% on the milling charge |
The 25 kg line is applied to each package, so several small labelled packs inside a larger sack remain taxable. The rates on rice, bran and husk were not changed in September 2025.
Hulling for a government agency under the public distribution system has been treated as exempt in some cases. Whether that applies depends on the agency and the contract, so check it before billing; otherwise the 5% rate applies.
Hulling for government agencies
Mills that hull paddy for a government agency are paid a hulling charge and must hand back rice at a fixed out-turn. The central norm is 67% for raw rice and 68% for parboiled rice. A mill that recovers less makes up the shortfall from its own pocket, so the recovery it actually achieves needs measuring lot by lot.
TDS and cash payments
| Payment | Tax at source |
|---|---|
| Hulling or milling charges you pay to another mill | TDS of 1% to individuals and HUFs (Hindu undivided families), 2% to others, once a single payment passes ₹30,000 or the year's total passes ₹1 lakh (Section 393(1), earlier 194C) |
| Purchases of goods, where your own turnover last year was over ₹10 crore | TDS of 0.1% of purchases from a supplier above ₹50 lakh in the year (Section 393(1), earlier 194Q) |
Whether the purchase-of-goods TDS applies to paddy bought directly from farmers is not settled by a clear exemption, so take advice on it. The ₹10,000 limit on cash payments has an exception for agricultural produce bought from the grower; keep the purchase records that show it. The TDS & TCS Checker works out the rate and dates for a payment.
Cost records and cost audit
Rice is not among the products listed in the Companies (Cost Records and Audit) Rules, 2014. Edible oils are listed, so a company that makes rice bran oil is covered for that product once it crosses the turnover limits. The Cost Audit Applicability Checker works through the tests. The cost audit page sets out the limits, forms and dates.
Before relying on this article
The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the Companies (Cost Records and Audit) Rules, 2014.
Rates and limits change with each Finance Act and GST notification.
This article is a summary for planning, not advice for a particular mill. The GST position on packed rice and on hulling for government agencies turns on the packing and the contract.
