Updated on July 05, 2025 05:54:23 PM
Industrial equipment and mechanical devices are the backbone of India's manufacturing and engineering industries. These devices are utilised in industries such as construction, agriculture, food processing, textiles, and packaging. For ensuring uniform taxation under the Goods and Services Tax (GST) framework, the Indian government allocates particular HSN (Harmonised System of Nomenclature) codes and GST rates to different types of machinery and equipment.
HSN code is an internationally accepted system created by the World Customs Organisation (WCO) to classify goods systematically. According to GST, these codes assist in identifying the proper tax rates for various types of machinery. Classification in this manner ensures transparency, minimises confusion, and facilitates hassle-free processing of returns and invoices.
For mechanical appliances and industrial machinery, HSN codes usually range from 8401 to 8487, depending on the machine's type and purpose. GST rates for these machines range from 12% to 28%, depending on their application, whether for general industrial use, agricultural, or specialised.
Knowledge of the right HSN code and the GST rate is essential for producers, importers, exporters, and distributors handling machinery. Use of an incorrect code can result in compliance failure, a fine, or a mismatch of input tax credit.
HSN is the acronym for Harmonised System of Nomenclature, which is a coding system worldwide produced by the World Customs Organisation (WCO). The primary function of HSN is to classify goods systematically for international trade, customs operations, and taxation. Under the Goods and Services Tax (GST) system, HSN codes are extensively applied in India to classify goods and allocate the proper tax rates.
Each of the HSN codes is from six to eight digits, the first two representing the chapter, the next two the heading, and the last few defining the product in finer detail. For instance, the machinery products will typically come under Chapter 84 of the HSN code scheme.
Employing HSN codes ensures uniformity in tax structures, ease of filing GST returns, and minimises tax calculation errors. It also enables businesses to conduct business smoothly in both domestic and foreign markets by ensuring their products are classified appropriately.
| Type of Machinery | GST Rate |
|---|---|
| Agricultural machinery (e.g., harvesters, threshers) | 12% |
| Textile machinery and looms | 18% |
| Industrial pumps and compressors | 18% |
| Machinery for food processing | 18% |
| Packaging and labelling machinery | 18% |
| Heavy construction equipment (e.g., bulldozers) | 28% |
| Machines for plastic and rubber processing | 18% |
| Printing machines | 18% |
| Electrical machinery and equipment | 18% or 28% |
| Parts and accessories of industrial machinery | 18% |
Here’s a list of commonly used industrial machinery along with their HSN codes to help businesses ensure correct GST classification and compliance:
| Machinery Type | HSN Code | Description |
|---|---|---|
| Agricultural Machinery | 8432, 8433 | Ploughs, seeders, harvesters, threshers |
| Food Processing Machinery | 8438 | Machinery for bakery, sugar, or other food production |
| Textile Machinery | 8445, 8446 | Spinning, weaving, and knitting machines |
| Printing Machinery | 8443 | Printers, copying machines, and related equipment |
| Plastic and Rubber Processing Machines | 8477 | Injection moulding, extruders |
| Construction Equipment | 8429, 8430 | Bulldozers, cranes, concrete mixers |
| Industrial Pumps and Compressors | 8413, 8414 | Used in industries like oil, water treatment |
| Machine Tools | 8456-8461 | Milling, grinding, drilling, and shaping machines |
| Packaging Machinery | 8422 | Labelling, sealing, filling, and packaging equipment |
| Parts of Machinery | 8483, 8487 | Shafts, bearings, gears, and other parts |
The implementation of GST has drastically changed the pricing and overall business processes associated with industrial machinery. Here's how:
Uniform Tax Structure
GST substituted several indirect taxes (such as VAT, excise, and service tax) with one tax, making the tax structure on machinery uniform and lessening the cascading effect of taxes.
Input Tax Credit (ITC)
Companies are now eligible to get input tax credit on GST incurred on the purchase of machines, resulting in cost savings and enhanced cash flow. This facilitates additional investment in capital equipment.
Pricing Transparency
Since there is a single GST rate for all states, the pricing of machines has become clear and predictable for both buyers and sellers.
Better Logistics
Removal of interstate tax obstacles has facilitated quicker and affordable transportation of heavy machinery, making operational expenses lower for companies.
Initial Price Rise for Some Equipment
For some equipment where the GST rate is higher (such as 28%), there was a temporary price rise relative to the previous tax regime.
Simplification of Doing Business
GST compliance with HSN codes and electronic filings has simplified doing business for companies, particularly those operating in several states.
The following are some of the latest updates and clarifications on GST rates on industrial machinery:
GST Rate Rationalisation
The GST Council is weighing rate rationalisation for specific kinds of industrial and agricultural machinery to increase manufacturing and ease the tax burden on MSMES.
Lowered GST on Certain Agricultural Equipment
To assist farmers, the GST rate on equipment such as manual threshers and simple irrigation systems has been lowered from 18% to 12%.
Clarity on Machinery Parts
It has been explained that components of machinery used exclusively with particular machinery will draw the same GST rate as applied to the machinery.
Revamped HSN Code Mapping
The GST portal now offers more precise HSN code search results to enable businesses to locate proper codes for machinery and complementary products.
Input Tax Credit (ITC) Rules Revised
Companies buying capital items such as machinery can still enjoy ITC, but will have to keep proper invoice documentation and HSN code usage to avert a mismatch.
Emphasis on Green Machinery
There have been discussions on granting tax concessions or lower rates of GST on environmentally friendly or energy-efficient industrial machinery under the green initiative by the government.
Simplification of Doing Business
GST compliance with HSN codes and electronic filings has simplified doing business for companies, particularly those operating in several states.
Conclusion
HSN code and GST rates for industrial and mechanical machinery are necessary for companies to remain compliant, keep costs under control, and have seamless tax operations. With GST simplifying the tax regime in India, the classification of machinery under the correct HSN code aids in correct invoicing, correct tax calculation, and input tax credit claiming.
Since GST percentages can range from 12% to 28% based on the machinery type, companies need to remain current with changes to ensure they don't face penalties and take advantage of potential tax benefits. Simply put, proper usage of HSN codes not only results in legal compliance but also helps in improved financial planning as well as enhanced efficiency in operations in industries.
At Professional Utilities, we leverage our industry knowledge and expertise to help businesses navigate complex regulations, minimize risks, and optimize operations for maximum efficiency and profitability.
Frequently Asked Questions (FAQs)
Industrial machinery is generally classified under HSN codes 84 and 85, with specific sub-headings depending on the nature and purpose of the machine
GST on machinery is usually between 12% and 28%, depending on the nature of the machinery and its application.
Yes, GST is chargeable on second-hand machinery, but the rate of tax could be determined under the margin scheme, subject to conditions.
Yes, if the machinery is for business use and you are a registered taxpayer, you can claim input tax credit for the GST paid.
Yes, machinery parts are taxable and typically come under 18% GST, if they are identifiable and placed under the right HSN classification.
You can check the HSN code on the official GST website, CBIC website, or take the help of a tax expert to ensure accuracy.
HSN codes are a requirement for companies with a turnover of over ₹5 crore. Small-scale companies might have fewer or no HSN reporting.
Yes, a few machines utilised in agricultural or renewable energy industries have experienced lowered GST rates. Always refer to recent GST Council notifications.
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