In short
Applies to: Private and co-operative sugar mills, with or without a distillery or co-generation plant
- Sugar and industrial alcohol are in Table A of the Companies (Cost Records and Audit) Rules, 2014, the list for regulated sectors, under tariff headings 1701, 1703 and 2207.
- Tamil Nadu adds a State incentive to the central price. Cane cost per tonne therefore has to be taken from the season's government order, not from the central figure alone.
- Because electricity is exempt, a mill that sells power has to reverse part of its common input credit.
This is the reference detail behind our Sugar Mills page: cost records and cost audit, prices set by the government, GST and .
A sugar mill buys cane at a price set by the government, sells sugar under a monthly release quota, and makes the rest of its money from molasses, ethanol, bagasse and power. Costing has to carry all of them at once.
Cost records and cost audit
Sugar and industrial alcohol are in Table A of the Companies (Cost Records and Audit) Rules, 2014, the list for regulated sectors, under tariff headings 1701, 1703 and 2207. For a sugar company:
| Requirement | Overall turnover in the previous year | Turnover from the listed products |
|---|---|---|
| Cost records | ₹35 crore or more | Not applicable |
| Cost audit | ₹50 crore or more | ₹25 crore or more |
Micro and small enterprises are outside the cost-records rule.
The rules apply to companies. Co-operative sugar mills are governed by their own law, though the same costing serves them equally. The cost audit page sets out the forms and dates.
Prices set by the government
| Item | Position |
|---|---|
| Fair and Remunerative Price of cane, 2025-26 season | ₹355 a quintal at a basic recovery of 10.25% |
| Fair and Remunerative Price of cane, 2026-27 season | ₹365 a quintal at a basic recovery of 10.25% |
| Minimum selling price of sugar | ₹31 a kg, unchanged since February 2019 |
| Sale of sugar | Under a monthly release quota for each mill |
Tamil Nadu adds a State incentive to the central price. Cane cost per tonne therefore has to be taken from the season's government order, not from the central figure alone.
GST
| Item | GST |
|---|---|
| Sugar | 5% |
| Molasses | 5% |
| Ethanol supplied to oil marketing companies for blending | 5% |
| Bagasse | 5% |
| Electricity sold from co-generation | Exempt |
Because electricity is exempt, a mill that sells power has to reverse part of its common input credit.
TDS on common payments
| Payment | Tax at source |
|---|---|
| Cane harvesting and transport contractors | 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 cane bought from farmers needs advice, as for other farm produce. The TDS & TCS Checker works out the rate and dates for a payment.
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. Prices and quotas are changed by government order during the season.
Sources
- Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
- Cabinet approves cane FRP of ₹365 a quintal for the 2026-27 season, Press Information Bureau
- Cabinet approves cane FRP for the 2025-26 season, Press Information Bureau
- Notification 17/2023-Central Tax (Rate): molasses
- GST Council, 56th meeting press release
- Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department
This article is for general information only and does not constitute professional advice. Please consult a qualified professional before acting on it.
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