GST on AC: Find HSN Code & GST Rate
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Air conditioners (ACs) are no longer considered luxury items for the privileged few. With rising temperatures and changing climatic conditions, they have become essential appliances for homes, offices, and commercial spaces. However, if you're a trader, manufacturer, or service provider dealing in ACs, it is important to understand the GST on AC, including the applicable HSN Code, GST rates, and how GST registration impacts your business operations.
In this comprehensive blog post, we will explore all key aspects related to GST on ACs—covering classification, rates, compliance needs, and input tax credit benefits. Whether you're a consumer trying to understand the tax you pay on your purchase or a business owner aiming to stay compliant, this guide will offer valuable insights.
Understanding GST and Its Impact on AC Sales
The Goods and Services Tax (GST) was introduced in India in 2017 as a unified indirect tax system to eliminate the cascading effect of multiple taxes. One of the primary goals of GST is to bring transparency and consistency in the taxation system across the country.
Under GST, goods and services are classified using HSN codes (Harmonized System of Nomenclature). Each code is linked to a specific GST rate. ACs fall under a particular HSN code and attract a specific tax rate based on their nature and components.
Let’s now dive deeper into the tax implications of buying or selling ACs in India.
HSN Code for AC: Classification of Air Conditioners Under GST
Under GST, air conditioners are categorized under the HSN Code 8415. This HSN code broadly includes machinery and equipment related to air conditioning that incorporates a motor-driven fan and elements for changing the temperature and humidity of air.
Here is a more detailed classification under HSN Code 8415:
Businesses involved in manufacturing, importing, distributing, or selling air conditioners must use this HSN code in their GST invoices, filings, and records.
GST Rate on Air Conditioners
As of the latest GST council decisions, ACs attract a GST rate of 28%. This is one of the highest tax brackets under GST, considering air conditioners as semi-luxury or energy-consuming items.
Breakdown:
GST Rate: 28%
CGST: 14%
SGST: 14% (if sold within the same state)
IGST: 28% (if sold between states)
Example Calculation:
Suppose you purchase an AC for ₹30,000. Here’s how GST applies:
GST @ 28% = ₹8,400
Total Price = ₹30,000 + ₹8,400 = ₹38,400
While the price of ACs may seem steep due to this high tax rate, businesses can offset this cost through Input Tax Credit (ITC) if they have active GST registration.
Who Should Register for GST in the AC Industry?
Businesses involved in the sale, manufacturing, or service of air conditioners must assess their tax liability and register under GST if they meet the prescribed turnover limits.
GST Registration Thresholds:
Normal Category States:
Goods: ₹40 lakhs
Services: ₹20 lakhs
Special Category States:
Goods: ₹20 lakhs
Services: ₹10 lakhs
If your business crosses these thresholds or engages in interstate trade, e-commerce, or is a manufacturer/importer of ACs, GST registration is mandatory.
Benefits of GST Registration for AC Dealers and Service Providers
Input Tax Credit (ITC):
One of the key benefits of GST registration is eligibility for claiming ITC.
AC dealers and service providers can claim credit on GST paid for raw materials, spare parts, packaging, installation tools, etc.
Legitimate Business Identity:
A GSTIN enhances business credibility and helps build trust among suppliers and customers.
Access to Wider Markets:
GST compliance allows you to conduct interstate sales and list your products on online marketplaces like Amazon and Flipkart.
Improved Compliance and Record-Keeping:
A structured GST system helps in maintaining proper invoicing and accounting records, essential for long-term business growth.
Legal Protection Against Penalties:
Unregistered businesses conducting taxable activities may face fines and penalties under GST law.
GST on Installation and AMC Services of AC
It is important to note that installation and maintenance services of ACs are taxed separately under GST.
Applicable GST Rates:
Installation Service: 18% GST (HSN Code: 998719)
AMC (Annual Maintenance Contract): 18% GST
These services are treated under the services category, and the GST rate is lower than the tax on the AC units themselves.
Input Tax Credit on AC Purchases for Business Use
If you are a business owner and purchase air conditioners for your office, showroom, or commercial use, you can claim the GST paid as ITC—provided the ACs are used in the course or furtherance of business.
However, if the ACs are for personal or residential use, you cannot claim ITC, even if you are a registered taxpayer.
Conditions to Claim ITC:
You must be registered under GST.
The invoice must be in your business’s name.
The AC must be used for business purposes.
The GST amount must be reflected in your GST return (GSTR-2B).
How to File GST for AC Dealers
Dealers and retailers of ACs need to file monthly or quarterly GST returns depending on their chosen scheme.
Regular GST Returns:
GSTR-1: Outward supplies
GSTR-3B: Summary of inward and outward supplies
GSTR-9: Annual return
Composition Scheme:
Small traders with turnover below ₹1.5 crore may opt for the composition scheme but must remember:
They cannot claim ITC
They pay tax at a reduced rate (1%)
Not allowed to sell interstate
Since ACs fall under the 28% tax slab and involve high costs, most businesses in this segment prefer the regular scheme to avail ITC benefits.
Common Challenges in GST Compliance for AC Dealers
High GST Rate:
Many customers find 28% GST excessive, which affects sales volumes.
Complexity in Input Credit:
Businesses must match invoices and reconcile ITC regularly.
Classification Errors:
Wrong HSN codes can lead to notices and penalties.
AMC and Service Invoices:
Dealers offering both products and services need to manage dual invoicing accurately.
To avoid these challenges, it is recommended to take help from professionals or platforms like Online Legal India, which provide end-to-end support for GST registration, filing, and compliance.
How Online Legal India Can Help
At Online Legal India, we provide a one-stop solution for all your GST needs:
GST Registration (for manufacturers, retailers, service providers)
Monthly & Quarterly GST Return Filing
HSN Code Guidance and Invoicing Support
Input Tax Credit Reconciliation
Consultation for Tax Planning and Compliance
Whether you are setting up a new electronics store, an HVAC business, or an e-commerce venture dealing in air conditioners, our experts ensure you remain fully GST-compliant with zero hassle.
Conclusion
Understanding GST on AC is crucial for both businesses and consumers. With a GST rate of 28% and an HSN Code of 8415, air conditioners are one of the higher-taxed items under India’s GST regime. However, businesses that are GST-registered can claim Input Tax Credit and benefit from seamless interstate trade and better compliance.
If you're a trader, importer, or service provider in the AC market, timely GST registration and correct filing can save you from legal troubles and improve your business's profitability. Make sure to use the right HSN code and adhere to tax filing deadlines.
For professional help, reach out to Online Legal India and ensure your business remains on the right side of tax law.
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