HSN Code & GST Rate for Industrial Machinery & Mechanical

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.

Here’s a list of commonly used industrial machinery along with their HSN codes to help businesses ensure correct GST classification and compliance:

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.