Is handmade butter a handicraft item? GST council to meet soon to fix new anomaly

NEW DELHI: Is handmade butter a handicraft item? Should wooden furniture qualify as handicrafts? The upcoming Goods and Services Tax Council meeting on January 18 may adopt a new definition of what constitutes a handicraft item as it looks to clear the air on the much-litigated issue even as the country looks to boost export of handicraft products.

A committee, set up by the council, has proposed a reduction in GST rate on the jobwork for handicraft items to 5%.

“Report has been submitted to the Council....It will take a call now,” said a government official. The council had formed the panel after several states pitched for reduced rates or exemption for several items as these were part of the handmade sector.


India exports about Rs 4,000 crore of handicrafts every year, including handmade carpets.

The sector’s key issue is that the tax regime does not distinguish between handmade and machinemade goods, putting the former at a disadvantage. The panel has suggested a stringent definition, which has remained ambiguous so far, creating an issue for the handicrafts sector.

The proposed definition states that handicraft items are goods predominantly made by hand even though some tools or machinery may also have been used in the process.

“Besides, such goods are graced with visual appeal in the nature of ornamentation or in-lay work or some similar work of a substantial nature; possess distinctive features, which can be aesthetic, artistic, ethnic or culturally attached and are amply different from mechanically produced goods of similar utility,” said a person familiar with the matter.

The panel, headed by Central Board of Excise and Customs chairman Vanaja Sarna, has also suggested a rejig in the nomenclature for identifying handicraft goods.

Products such as handmade paper, handmade envelopes, letter cards, postcards, handmade boxes, pouches and wallets, handmade agarbattis, handmade fabric have been recommended for inclusion as handicraft items by the panel. However, they have not included dresses or sarees.

Handmade shawls and wooden tableware, cane and bamboo furniture have been recommended for inclusion as handicraft items.

The Supreme Court had, in a case between Loius Shoppe and central excise authorities, laid down broad guidelines on determining handicraft products.

It had said that handicraft items must satisfy two conditions: It must be predominantly made by hand (it does not matter if some machinery is also used in the process) and secondly, it must be graced with visual appeal in the nature of ornamentation or in-lay work or some similar work lending it an element of artistic improvement and such ornamentation must be of a substantial nature and not a mere pretence.