GST on Washing Machine: Latest Tax Rates and Price Impact

Consumers and businesses need to understand the implications of the Goods and Services Tax (GST) on washing machines. This article informs you of the rate of GST on washing machine, the relevant Harmonized System of Nomenclature (HSN) codes, and the process for claiming Input Tax Credit (ITC).

It covers recent regulatory changes, such as the mandatory use of the Input Service Distributor (ISD) mechanism effective April 1, 2025, and the requirement for HSN code reporting in GSTR-1 filings. By comprehending these aspects, you can ensure compliance with tax regulations and make informed financial decisions.

What is GST on Washing Machine?

The Goods and Services Tax (GST) on washing machines in India is set at 18%, applicable uniformly across all types, including fully automatic, semi-automatic, front-loading, and top-loading models. This tax rate contributes to the final price paid by consumers when they purchase a washing machine.

For example, a washing machine priced at Rs.15,000 would incur a GST of Rs.2,700, which brings the total cost to Rs.17,700 for the customer. Both consumers and businesses need to understand this tax component to make informed financial decisions and ensure compliance with tax regulations.

HSN Codes for Washing Machines

The Harmonized System of Nomenclature (HSN) code for washing machines is 8450, which encompasses various types of household and laundry-type washing machines. This includes those that both wash and dry. This classification is crucial for the determination of the applicable Goods and Services Tax (GST) rate and ensures compliance with tax regulations.

Under HSN code 8450, the following subcategories are defined:

Accurate classification under HSN code 84509090 is crucial for manufacturers, importers, and sellers to ensure compliance with tax regulations, proper invoicing, and to facilitate the claiming of ITC where applicable.

GST on washing machine on all these categories attract an 18% GST rate. It is important to note that the GST rate for washing machines was reduced from 28% to 18% effective July 27, 2018, to make home appliances more affordable for consumers.

For businesses, accurate identification and application of the correct HSN code is essential for proper invoicing, tax calculation, and compliance with GST regulations. Utilizing the appropriate HSN code ensures transparency in pricing and facilitates the claim of Input Tax Credit where applicable.

Manufacturers and sellers of washing machines in India can leverage the ITC mechanism under the GST regime to reduce their overall tax liability. By claiming ITC on the GST paid for raw materials and other inputs used in the production and sale of washing machines, businesses can offset this amount against the GST collected on sales, effectively lowering their net tax payable.

Eligibility Criteria for Claiming ITC

To claim Input Tax Credit under the GST regime, a business must meet several essential conditions. Firstly, the business must be registered under GST. It is also mandatory to possess valid documentation, such as a tax invoice or debit note issued by a registered supplier. The goods or services in question must have been received by the claimant.

Additionally, the supplier must have paid the GST collected to the government. The claimant is also required to file the relevant GST returns on time. Payment to the supplier must be made within 180 days from the date of the invoice, including the tax amount. If this payment condition is not met, the ITC claimed will be reversed, and the claimant will be liable to pay applicable interest on the reversed amount.

• Steps to Claim ITC:

To claim ITC under GST, verify ITC using GSTR-2B and ensure it matches your books of accounts. File GSTR-3B to report output tax and ITC. Address any mismatches with supplier data promptly.

After reconciliation, claim the corrected ITC in the next return. If excess ITC has been claimed, reverse the extra amount along with applicable interest to maintain compliance. Regular reconciliation and timely action help ensure accurate ITC claims and avoid penalties.

• Additional Considerations:

ITC can be claimed on capital goods like machinery used for business purposes, but not for personal use. However, certain goods and services are ineligible for ITC, such as those used for personal consumption or exempt supplies.

ITC must be claimed by the earlier of the two dates:

1. The due date for filing the annual return for the financial year
2. The date of filing the monthly return for September of the next financial year.

Manufacturers and sellers can effectively manage their tax liabilities and ensure compliance with GST regulations by adhering to these guidelines.

Mandatory ISD Mechanism for ITC Distribution

From April 1, 2025, Businesses in India must use the Input Service Distributor system to distribute common Input Tax Credit across multiple GST registrations under the same PAN. This replaces the previous option to choose between the ISD system and the cross-charge method.

With this new rule, businesses must allocate ITC using the ISD mechanism for services like audit, software licensing, manpower supply, security, banking, consultancy, and litigation services that are used in multiple locations.

If businesses do not follow this rule and continue to use the cross-charge method, they could lose their ITC claim. The authorities may recover the excess or incorrect ITC along with interest. Additionally, a penalty of at least Rs.10,000 or the value of the incorrect ITC will be imposed.

This change requires businesses to adjust their systems and processes to comply with the new ISD mechanism for ITC distribution.

Mandatory HSN Code Reporting in GSTR-1

From February 2025, businesses in India must report HSN (Harmonized System of Nomenclature) codes in Table 12 of GSTR-1/1A. This requirement is based on the taxpayer's Aggregate Annual Turnover (AATO) in the preceding financial year. Taxpayers with an AATO up to Rs.5 crore must report 4-digit HSN codes, while those with an AATO exceeding Rs.5 crore must report 6-digit HSN codes.

From February 2025, manual entry of HSN codes is no longer permitted. Taxpayers must select the appropriate HSN codes from a predefined dropdown list provided in the GST portal. Upon selection, the corresponding description will automatically populate in the "Description as per HSN Code" field.

Additionally, Table 12 has been bifurcated into two tabs:

1. "B2B Supplies"
2. "B2C Supplies."

This segregation allows taxpayers to report HSN-wise summary details separately under each category. To ensure accuracy, the system will validate the values of B2B and B2C supplies reported in Table 12 against other relevant tables in GSTR-1.

Initially, these validations will function in warning mode. It allows taxpayers to file GSTR-1 even if discrepancies are detected. These enhancements aim to streamline GST filings and improve compliance.

This change aims to enhance compliance and accuracy in GST filings. Businesses are advised to familiarize themselves with the updated HSN reporting requirements and ensure the timely and accurate submission of GSTR-1/1A returns.

GST Compliance for Washing Machine Sellers

Washing machine sellers in India must adhere to specific Goods and Services Tax (GST) compliance requirements, including registration thresholds, invoicing norms, and timely return filings, to ensure smooth operations and avoid penalties.

• GST Registration

If your annual turnover exceeds Rs.40 lakh, you must register for GST. For businesses in special category states, the threshold is Rs.20 lakh.

• GST Invoicing

Issue GST-compliant invoices that include your GSTIN, invoice number, date, buyer details, and the correct HSN code for washing machines, which is 8450.

• GST Returns Filing

File GSTR-1 to report sales and GSTR-3B to report tax payments. Depending on your turnover, these returns can be filed monthly or quarterly.

• Record Keeping

Maintain accurate records of all sales, purchases, GST invoices, and input tax credits. Proper documentation is essential for compliance and audits.

• GST Audit

If your annual turnover exceeds Rs. 2 crore, you are required to have your accounts audited by a Chartered Accountant or Cost Accountant.

Washing machine sellers can ensure compliance with GST regulations and avoid potential penalties if they comply with the guidelines of the government.

Impact of GST Rate Reduction

The reduction of the Goods and Services Tax rate on washing machines from 28% to 18% has significantly decreased the overall cost for the consumers.

For example, a washing machine priced at Rs. 15,000 would now attract Rs. 2700 as GST. This will make the total cost Rs. 17,700. Under the previous 28% GST rate, which would have cost Rs. 19,200.

This tax cut has made washing machines more affordable. It encourages the increase in demand and sales. Manufacturers benefit from reduced tax burdens, which enables them to offer competitive pricing. It further stimulates market growth.

Conclusion

The GST rate reduction has positively impacted both consumers and the domestic appliance industry by lowering prices and boosting sales. From April 1, 2025, businesses with multiple GST registrations under the same PAN must distribute Input Tax Credit solely through the Input Service Distributor mechanism. This replaces the earlier option of using cross-charge methods. Non-compliance may lead to ITC denial, recovery with interest, and penalties of at least Rs.10,000.

Navigating these changes can be complex. Online Legal India offers expert assistance in GST registration, return filing, and ensuring compliance with the latest regulations. We can help you throughout the process. Contact our experts today.