Understanding GST Rates and HSN Codes for Paints
This article clarifies the GST framework for paints in India, detailing the historical tax environment and the current 18% GST rate applicable since 2018. It outlines various HSN codes for different paint products and examines the conditions under which Input Tax Credit (ITC) can be claimed. The reduction in GST has positively impacted the paint industry, leading to cost savings and streamlined operations, emphasizing the importance for businesses to understand these tax regulations.
The Goods and Services Tax (GST) framework for paints has undergone notable revisions. Initially, paints were subject to a 28% GST rate, which was subsequently lowered to 18% in 2018. This adjustment significantly affected the paint industry, influencing manufacturers, suppliers, and consumers across the market. This article explores the implications of GST on paints, detailing the applicable GST rates, HSN codes, and the eligibility for Input Tax Credit (ITC).
Historical Taxation of Paints and Related Products
Before the introduction of GST, paints and associated products were subject to various taxes, including Excise Duty and Value Added Tax (VAT). The specific tax structure varied based on the type of tax and the state where the transaction took place. For instance, a 12.5% excise duty was imposed on manufacturing paints. When sold, VAT rates ranged from 12.5% to 14.5%, depending on the state's regulations.
Under the initial GST regime, paints faced a uniform tax rate of 28%. This rate was generally comparable to the combined burden of pre-GST taxes. However, following requests from the paint industry, the rate was later reduced to 18%.
Current GST Rates and HSN Codes for Paints
During the 28th GST Council meeting, a decision was made to decrease the GST rate on paints from 28% to 18%. The table below provides a detailed breakdown of GST rates and Harmonized System of Nomenclature (HSN) codes for paints and other related items:
| Description | HSN Code | GST |
|---|---|---|
| Colour lakes, preparations based on colour lakes (as specified in Note 3 to this Chapter) | 3205 | 18% |
| Paints and varnishes (including lacquers and enamels) based on synthetic or chemically modified natural polymers, that are dispersed or dissolved in a non-aqueous medium; Solutions defined in Note 4 to this Chapter | 3208 | 18% |
| Synthetic enamel, ultra white paints | 32089021 | 18% |
| Synthetic enamel, other colours | 32089021 | 18% |
| Other enamels | 32089029 | 18% |
| Other lacquers | 32089030 | 18% |
| Other varnishes | 32089049 | 18% |
| Paints and varnishes (including lacquers and enamels) based on synthetic or chemically modified natural polymers, that are dispersed or dissolved in an aqueous medium | 3209 | 18% |
| Paint based on Acrylic Vinyl Polymer | 32091090 | 18 % |
| Dispersion paints | 32099010 | 18 % |
| Acrylic emulsion paints and varnishes (including enamels and lacquers) | 32091010 | 18 % |
| Emulsion paints not specified elsewhere or included | 32099020 | 18 % |
| Paints, varnishes, enamels, lacquers, and distempers that are not based on synthetic polymers or chemically modified natural polymers. Additionally, prepared water pigments that are specifically used for finishing leather. | 3210 | 18% |
| Pigments, including metallic powders and flakes, that are dispersed in non-aqueous media, in paste or liquid form, of a type used in the manufacture of paints and enamels; stamping foils; dyes and other colouring matter put up in forms or packings for retail sale | 3212 | 18% |
| Students, artists, or signboard painters colours, amusement colours, modifying tints, and the like, in tubes, jars, tablets, bottles, pans, or in similar packings or forms | 3213 | 18% |
| Brushes specifically designed for applying paint, distemper, varnish, or similar coatings. This excludes brushes classified under sub-heading 9603 30, but also includes paint pads and rollers. | 960340 | 18% |
GST's Influence on India's Paint Sector
The reduction in GST rates from 28% to 18% has positively impacted the Indian paint industry. This change offered considerable relief to both manufacturers and customers, leading to notable cost savings throughout the sector.
Eligibility for Input Tax Credit on Paints
Input Tax Credit (ITC) allows businesses to deduct taxes paid on their purchases (inputs) from the taxes they collect on their sales (outputs). The availability of ITC on GST paid for paints depends on whether the expenditure is treated as a capital expense or a revenue expense.
If the paint expense is capitalized as part of construction for an immovable property, ITC on the GST paid for the paint generally cannot be claimed to the extent of its capitalization. However, if the expense is charged to revenue or used for repairing existing furniture and fixtures, ITC on the GST paid for paints may be claimed in accordance with the provisions outlined in Section 16 of the CGST Act, 2017.
Conclusion
For businesses operating in the paint or construction sectors, a clear understanding of GST rates and HSN codes for paints is essential. By ensuring compliance with the correct tax rates and accurately assigning the appropriate HSN codes, businesses can maintain regulatory adherence and optimize their operational efficiency.