GST Rate and HSN Code for Products of Iron & Steel

HSN, or Harmonized System of Nomenclature, is an internationally accepted framework created by the World Customs Organization (WCO) for classifying goods systematically and logically. In India, HSN codes are used for identifying goods for taxation under Goods and Services Tax (GST).

As an example, the structure of HSN codes is 6 to 8 digits in length, which assists in identifying the goods category. The first two digits refer to a classification chapter; the next two digits indicate heading classification; each of the remaining digits determines the actual product. Iron and steel goods would generally be classified under HSN Chapter 72.

It is essential for invoices to use the correct HSN code because it ensures uniformity of tax treatment across the nation, allowing for accurate tax filing, and reducing disputes or penalties. Additionally, it assists businesses in claiming Input Tax Credit (ITC) free from any mismatches.

The application of GST has had benefits and challenges for the iron and steel industry, especially regarding pricing. It can be summarized as follows:

• Standardization in Tax: With GST, taxation on iron and steel products went from a messy array of indirect taxes (excise duty, VAT, entry tax, etc.) to a single and consistent tax, mostly at 18%.This offered commonality in terms of pricing across states.
• Reduced Cascading Taxes: GST has managed to reduce the effect of "cascading" taxes, whilst removing hidden costs along the supply chain. This changed pricing and, for some types of products, even reduced the final pricing for buyers.
• Input Tax Credit (ITC): Manufacturers and traders can now monitor the input tax, thus allowing them to reduce their costs of production and offer more competitive pricing.
• Initial Price Changes: As a general point, there were price changes due to compliance changes,working capital pressure, and the re-sizing of taxation elements from production to the consumer during the early or waiting phases. These have flattened out as GST has matured.
• Impact on Small Traders: For unregistered or small traders, there will likely be compliance costs associated with the GST regime. For a small trader, adding costs at a time of reduced volume and potentially higher input costs would have a marginal effect on their selling price.