Fancy Rakhis are taxable under GST and not exempt items
West Bengal AAR ruled that decorative Rakhis are taxable and cannot be treated as exempt puja samagri or handicraft items under GST.
- Ruling
- 08/WBAAR/2018-19 dated 05/07/2018
- Dated
- 05 Jul 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Decorative Rakhis are not exempt GST items like religious puja samagri
- Fancy Rakhis are not classified as exempt handicraft items under GST rules
- Multi-material Rakhis must be taxed based on the last applicable tariff code
In short
The company asked the West Bengal Authority for Advance Ruling whether decorative Rakhis made from materials like silk, beads, metal, and plastic are exempt from Goods and Services Tax (GST). They argued that Rakhis are traditional handicrafts or religious prayer items, similar to holy threads like Kalava.
What has changed
How it worked before
Before this ruling, many businesses assumed fancy Rakhis were completely exempt from GST, treating them either as traditional handicraft items or as exempt religious prayer goods like sacred threads.
What has changed
The authority ruled in order 08/WBAAR/2018-19 that fancy, designer Rakhis are commercial goods made from multiple materials and are fully taxable under GST. Only plain sacred cotton thread like Kalava is exempt as prayer material. When a Rakhi uses multiple materials, the maker must identify all matching tariff codes and use the heading that appears last in numerical order under Customs rules.
Who this affects
Businesses and traders who manufacture or sell decorative, designer, or fancy Rakhis made with mixed materials like plastic beads, metal, stones, or silk.
An example
A business in Kolkata manufactures designer Rakhis using silk thread, plastic beads, and metal pendants. They want to know if they can sell these without collecting Goods and Services Tax (GST) by treating them as religious items. Following the logic of order 08/WBAAR/2018-19, these Rakhis are taxable commercial goods, and the owner must classify them using the tariff code that comes last in numerical order among the materials used.
What you should do
If you sell fancy Rakhis, you should classify them based on their constituent materials rather than treating them as tax-free. Keep in mind that an advance ruling binds only the business that asked for it, so you should consult a tax professional or apply for your own ruling if your tax officer raises a doubt.
If you do nothing
If you treat fancy Rakhis as tax-exempt without an official ruling for your business, your local tax officer may issue a demand for unpaid GST. You could face steep interest charges and penalties, and you will have to pay the tax out of your own pocket since you did not collect it from buyers.
The terms explained
- input tax credit
- The tax you pay on buying raw materials or business supplies, which you can subtract from the tax you collect on your final sales.
- puja samagri
- Goods specifically used in religious worship ceremonies, some of which are given tax-free status under GST rules.
- advance ruling
- A formal clarification given by tax authorities to a specific business about how tax law applies to their goods or services.
The ruling in detail
Authority for Advance Ruling
M D Mohta
08/WBAAR/2018-19 dated 05/07/2018 · West Bengal
Questions before the authority
- Classification of 'Rakhi', on whether exemption under Notification No. 2/2017-Central Tax (Rate) dated 28/06/2017 (1126-FT dated 28/06/2017 of State Tax) is applicable for such manufacture, and if not, the taxability of the same.
Facts
The Applicant is an intended manufacturer and trader of decorative, designer, and fancy 'Rakhi' made from various constituent materials including cotton, zari, silk, and nylon threads, glass beads, plastic beads, coloured stones, metal pendants, and rudraksha. The Applicant claimed that Rakhi is traditionally a handicraft item or exempt puja samagri (akin to Kalava) under GST, or alternatively classifiable as a textile made-up article under Tariff Heading 6307.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification and GST taxability of 'Rakhi' | Classifiable as per constituent materials under **Rule 3(c) of Rules for Interpretation** of the Customs Tariff Act, 1975; GST leviable accordingly. Classified under the heading that occurs last in numerical order among the constituent materials that equally merit consideration. |
| Applicability of Exemption Notification No. 2/2017-Central Tax (Rate) | Not applicable for 'Rakhi'. Designer/fancy Rakhis are neither listed as puja samagri nor treated as exempt Kalava or handicraft goods under GST. |
The Authority held that decorative or fancy 'Rakhi' is **not exempt** from GST as puja samagri under Notification No. 2/2017-Central Tax (Rate) nor does it qualify as a handicraft product under GST notifications. The Applicant must classify 'Rakhi' based on its constituent materials by applying **Rule 3(c) of the Rules for Interpretation** of the Customs Tariff Act, 1975, and pay GST accordingly.
Reasoning
The Authority observed that 'Rakhi' is not included in the list of handicraft items under Notification No. 32/2017-Central Tax (as amended by Notification No. 38/2017-Central Tax) nor is it an essential part of puja samagri listed under Serial No. 148 of Notification No. 2/2017-Central Tax (Rate). TRU Clarification (Serial No. 92) exempts only pure Kalava (red/yellow cotton thread used in prayer ceremonies), whereas fancy/designer Rakhis are commercial products made of diverse components. As Rakhis are not made-up textile articles under Chapter 63 and cannot be classified under a single specific heading, **Rule 3(c) of the Rules for Interpretation** must be invoked to classify the product under the heading that occurs last in numerical order among those equally meriting consideration.
Provisions relied on
- Notification No. 2/2017-Central Tax (Rate) dated 28/06/2017
- Notification No. 1/2017-Central Tax (Rate) dated 28/06/2017
- Notification No. 32/2017-Central Tax dated 15.09.2017
- Notification No. 38/2017-Central Tax dated 13.10.2017
- Rule 3(c) of Rules for Interpretation of the Customs Tariff Act, 1975
- Section 97(2)(a) of the CGST Act, 2017 / WBGST Act, 2017
- F. No. 332/2/2017-TRU (Serial No. 92)
For the practitioner
This order establishes that fancy or decorative Rakhis comprising multiple materials are taxable under GST and cannot claim exemption as handicraft or puja samagri. Practitioners advising manufacturers of multi-material decorative goods should use **Rule 3(c) GRI** to determine classification based on the constituent material falling under the numerical tariff heading that appears last.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/order_no._8_of_fy_19_dated_05072018.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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