GST on AC: Find HSN Code & GST Rate

Air conditioners (ACs), which were once considered luxury appliances, have now become a common fixture in Indian homes, offices, and commercial establishments. With rising temperatures and increased affordability, the demand for ACs continues to grow. In this context, understanding the Goods and Services Tax (GST) implications on ACs is crucial for manufacturers, traders, and consumers alike.

This article offers a detailed breakdown of the applicable GST rate on AC, relevant HSN codes, input tax credit (ITC) eligibility, and essential compliance guidelines that businesses must follow.

What is GST? A Quick Overview

The Goods and Services Tax (GST) is a unified indirect tax system that came into force in India on July 1, 2017. It was introduced to consolidate multiple indirect taxes such as VAT, service tax, and excise duty into a single framework. GST is levied at each stage of the supply chain, but it is designed to be a destination-based tax, meaning the tax revenue is accrued by the state where the final consumption takes place.

GST is structured under a dual model:

• CGST (Central GST) and SGST (State GST) for transactions within a state.
• IGST (Integrated GST) for inter-state transactions.

One of the biggest advantages of GST is the Input Tax Credit (ITC) mechanism, which allows businesses to claim credit for the GST paid on purchases and inputs used in the production or sale of goods and services.

Why is GST Applied to AC in India?

Air conditioners are taxed under GST because they are categorized as non-essential or luxury items. This classification influences how the government decides on the applicable tax rate. AC attract the highest GST slab of 28%, and the reasoning behind this includes:

1. Revenue Optimization: By placing ACs in the 28% slab, the government can collect more revenue from goods deemed luxurious or discretionary.
2. Taxation Equity: Essential items such as food and medicines are taxed at lower rates, while luxury items like ACs bear a higher tax burden, promoting a fairer tax system.
3. Environmental Considerations: High energy consumption by ACs contributes significantly to electricity demand. Imposing a higher tax may indirectly discourage overuse and encourage energy-efficient alternatives.

So, when a consumer purchases an air conditioner, the 28% GST is added to the retail price, and this amount is collected by the seller and remitted to the government.

GST on Air Conditioners: Quick Overview

Comprehensive Guide: GST Rate on Air Conditioners (AC)

If you're buying, selling, or manufacturing air conditioners, understanding the applicable GST rates is vital for compliance and cost calculations. Here's a clear and updated breakdown of the GST on ACs, including rate slabs and HSN code details.

Applicable GST on AC

Under the GST framework, air conditioners are categorized as non-essential or luxury appliances. As such, they attract the highest GST rate.

• GST Rate: 28%
• Breakup for Intrastate Transactions:
  • CGST: 14%
  • SGST: 14%
• For Interstate Transactions:
  • IGST: 28%

This rate is uniformly applied, regardless of the air conditioner's brand, cooling capacity (1 ton, 1.5 ton, 2 ton, etc.), or model type (such as window, split, or inverter ACs).

HSN Code for Air Conditioners

The Harmonized System of Nomenclature (HSN) code is used to systematically classify goods for taxation under GST. Proper identification using the correct HSN code ensures accurate tax filing and prevents compliance issues. Air conditioners fall under a specific HSN code, which businesses must reference while generating invoices or filing GST return.

HSN Code for Air Conditioners (ACs): 8415

The HSN Code 8415 is designated for air conditioning machines, which includes various types of AC units used across residential, commercial, and industrial settings. Here’s what falls under this classification:

• Window Air Conditioners
• Split ACs
• Cassette ACs
• Portable Air Conditioners
• Inverter AC Units
• ACs with Refrigeration Equipment

While HSN 8415 also encompasses air conditioners designed for automotive use, integrated or built-in units for vehicles may be classified under different codes, especially when categorized under automobile manufacturing components.

GST Compliance for Businesses Dealing in ACs

Businesses that sell, install, or purchase ACs for operational purposes need to be aware of how the Input Tax Credit (ITC) system applies under the GST framework. Proper understanding of ITC eligibility can significantly reduce the effective tax burden for registered businesses.

ITC Eligibility on Air Conditioner Purchases

Registered GST entities can claim Input Tax Credit on air conditioners only when they are used exclusively for business purposes. Here are some examples of eligible scenarios:

• Office Installations: ACs installed in office premises for staff welfare or operational comfort.
• Customer-Facing Outlets: Units used in retail stores, showrooms, or reception areas to create a customer-friendly environment.
• Industrial or Warehouse Use: ACs deployed in production zones or storage areas to ensure quality control or enhance working conditions.

In all such use cases, the full 28% GST paid during the purchase of ACs can be claimed as ITC in monthly GST returns (e.g., GSTR-3B), lowering the company's overall tax liability.

Example:

Situations Where ITC on ACs is Disallowed

Despite the availability of ITC, there are specific cases where claiming credit on air conditioners is either partially restricted or entirely disallowed:

• Personal or Non-Business Use: If the air conditioner is acquired for personal comfort at a home or residence of the proprietor, director, or staff, it is not eligible for ITC.
• Gifts and Promotional Freebies: According to Section 17(5) of the CGST Act, ITC is not permitted if the AC is distributed as a gift, promotional giveaway, or business incentive, even if it supports indirect marketing efforts.
• Mixed Use (Business + Personal): If the air conditioner serves both personal and business functions, businesses are required to proportionately reverse the ITC corresponding to the personal use component, based on Rule 42 of the CGST Rules.

GST Compliance Guidelines for Sellers and Retailers of Air Conditioners

For businesses involved in the sale or distribution of air conditioners, compliance with GST regulations is essential to avoid penalties and ensure seamless operations. Below are the key GST obligations and rules that sellers and retailers must follow:

1. Mandatory Use of HSN Code 8415
   If your annual turnover exceeds Rs 5 crore, it is mandatory to mention the correct HSN code (8415) for air conditioners in every invoice you issue.
2. E-Invoicing Requirement
   As per recent amendments applicable from FY 2023–24, businesses with turnover exceeding Rs 5 crore must generate e-invoices. This ensures transparency and auto-population of data in GST returns.
3. GST Returns Filing
   • GSTR-1: Must be filed to report outward supplies (i.e., sales of ACs).
   • GSTR-3B: A monthly or quarterly summary return that captures overall input and output tax liability.
4. Input Tax Credit Reconciliation
   Regular matching of purchase data with GSTR-2B is crucial to ensure input tax credit (ITC) is accurately claimed. Any mismatch in vendor invoices can lead to ITC denial or reversal.
5. GST on AMC Services for ACs
   Annual Maintenance Contracts (AMCs) related to air conditioners are treated separately from the product itself.
   • Applicable GST Rate for AMC Services: 18%
   • This rate applies to installation, repair, and periodic maintenance services, and these must be invoiced separately using SAC codes.

Taxation of Air Conditioner-Related Goods and Services

Before diving into the GST rates and classification of products and services associated with ACs, it's important to understand the two primary coding systems under GST:

• HSN (Harmonized System of Nomenclature): Used for the classification of goods under GST. It helps standardize product categorization at the global level and determines applicable tax rates.
• SAC (Service Accounting Code): Used for classifying services under GST in India. SAC codes ensure that services like maintenance, installation, or consultancy are properly taxed.

Let’s now explore the GST rates and codes relevant to accessories, components, and services associated with air conditioners.

Comparison with Pre-GST Era (VAT + Excise)

Before GST, air conditioners were taxed at:

• Excise Duty: ~12.5%
• VAT: ~12.5%–14.5% (depending on state)

Effective Tax: ~27%–29%

Thus, the current GST of 28% is roughly similar to the cumulative taxes in the pre-GST era, but with simplified compliance and ITC advantage.

GST on Air Conditioners: B2B vs B2C Impact

Latest Updates & Notifications (As of 2025)

As of April 2025, there has been no change in the GST rate for air conditioners, which remain in the 28% tax bracket—the highest under GST. The HSN code 8415, applicable to all types of ACs, also remains unchanged, ensuring consistency in product classification and invoice accuracy. In line with GST rules, the movement of AC units valued above Rs 50,000 requires an E-way bill, which is mandatory for tracking during transportation. Additionally, sellers offering ACs through e-commerce platforms must be GST-registered and comply with Tax Collected at Source (TCS) regulations.

GST Tips for AC Traders, Dealers, and Service Providers

To maintain GST compliance, businesses should issue clear invoices with HSN code 8415, ensuring traceability during audits. Those with an annual turnover below Rs 1.5 crore and engaged only in intra-state sales may opt for the Composition Scheme, although it's not suited for inter-state dealers. When providing combo offers (like AC plus installation), issue separate invoices—one for the AC (28% GST) and one for the service (18% GST)—to apply correct tax rates. Also, assess if reverse charge applies when availing imported services like technical support or AMC from foreign providers.

Conclusion

Air conditioners in India attract a 28% GST, classified under HSN code 8415. Though taxed at the highest rate, businesses can offset this through Input Tax Credit, reducing the overall tax impact. Accurate classification, compliant invoicing, and adherence to GST rules are key to smooth operations for AC-related businesses. Contact Online Legal India to get assisted in understanding GST on AC.

FAQs on GST Charges on AC in India

1. What is the GST rate on ACs in India?

Answer: Air conditioners attract a 28% GST rate, which is the highest slab under the GST regime. This includes 14% CGST and 14% SGST for intra-state supplies or 28% IGST for inter-state transactions.

2. What is the HSN code for air conditioners?

Answer: The HSN code for air conditioners is 8415, covering all types of ACs including window, split, inverter, and portable models.

3. Why are air conditioners taxed at 28% under GST?

Answer: ACs are classified as luxury or non-essential appliances. Hence, they fall into the 28% tax slab to generate higher revenue and encourage energy-efficient alternatives.

4. Can businesses claim Input Tax Credit (ITC) on the purchase of ACs?

Answer: Yes, businesses can claim ITC on ACs if the units are used for business purposes, such as in offices or factories. However, ITC is not allowed for personal use or gifts.

5. Is GST applicable on air conditioner installation charges?

Answer: Yes, installation services for air conditioners are taxed separately at 18% GST, even if bundled with the sale.

6. What is the GST rate on AMC (Annual Maintenance Contract) for ACs?

Answer: The GST on AMC services for air conditioners is 18%, as it falls under repair and maintenance services.

7. Can AC dealers and retailers claim ITC on stock purchases?

Answer: Absolutely. AC dealers, resellers, and showrooms can claim full ITC on GST paid for stock purchases meant for resale or trading purposes.

8. Is GST applicable on second-hand or refurbished air conditioners?

Answer: Yes, GST is applicable on the sale of second-hand or refurbished ACs, typically at 28%, unless sold under the margin scheme by a registered dealer.

9. Do online AC purchases attract the same GST rate?

Answer: Yes, buying an air conditioner online attracts 28% GST, regardless of the platform (e.g., Amazon, Flipkart), as long as the seller is registered under GST.

10. Is an E-way bill required for transporting air conditioners?

Answer: Yes, if the value of a single consignment exceeds Rs 50,000, an E-way bill is mandatory for transporting air conditioners under GST rules.