GST on air conditioners is levied at 28%, being the highest tax slab under GST. On the implementation of GST, the tax rates were reduced for most electronic goods except air conditioners and large screen TVs, Under the GST regime in India, air conditioners, whether split or window units are subject to a 28% GST rate, the highest slab designated for luxury goods. This GST rate applies uniformly to residential and commercial air conditioners, making them relatively more expensive than other household electronic appliances. Currently, no exemptions are available under GST for the sale of air conditioners, further confirming their status as a premium product in the Indian market.
What is the Applicability of GST on AC in India?
GST is applicable to nearly all electronic goods, including air conditioners, under the Goods and Services Tax regime. The GST framework has four primary tax slabs: 5%, 12%, 18%, and 28%. Essential goods fall under the 5% slab, while standard rates of 12% and 18% apply to most other products. However, luxury items like air conditioners are classified under the highest tax slab of 28%. This classification reflects the luxury status of air conditioners, making them subject to the maximum AC GST rate.
What is the Price of an Air Conditioner Before and After GST?
Before GST, air conditioners were subject to multiple indirect taxes, including VAT, excise duty, and service tax, with varying rates by state. VAT ranged between 12.5% and 14.5% for consumer durables, while excise duty was charged at 12.5% and additional cess in some cases. The cumulative tax burden on air conditioners under the pre-GST system reached up to 27%.
With the introduction of GST, a uniform rate of 28% was applied to air conditioners. Although this led to a slight increase in the effective tax rate by 1% to 5%, the streamlined structure ensures consistent pricing nationwide, eliminating state-wise disparities.
The table below compares the pricing of air conditioners before and after GST
Particulars | Before GST (₹) | After GST (₹) |
Manufacturing Cost | 60,000 | 60,000 |
Excise Duty (12.5%) | 7,500 | Not Applicable |
Total Cost of Manufacturing | 67,500 | 60,000 |
Transportation Charges | 5,000 | 5,000 |
Additional Costs for Value Added | 5,000 | 5,000 |
Final Product Price | 88,350 | 89,600 |
VAT (14%) / GST (28%) | 10,850 | 19,600 |
What is the HSN Code of Air Conditioners?
Air conditioners fall under various categories based on their features and capacities. Below is the breakdown of different types of air conditioner HSN code and GST rate:
HSN Code of Air Conditioner | Description |
8415 | An air conditioner with a motor fan meant for changing the humidity and temperature. |
841583 | Air conditioners not incorporating a refrigeration unit. |
84158310 | A split air conditioner with a capacity of 2 tonnes and above – not incorporating a refrigeration unit. |
84158390 | Other air conditioners not incorporating a refrigeration unit. |
Input Tax Credit (ITC) under GST for Air Conditioners
Section 17(5) of the CGST Act restricts ITC on goods or services used to construct immovable property, except for plant and machinery.
According to Section 3(26) of the General Clauses Act, 1897, immovable property refers to “things attached to the earth or permanently attached to the walls and buildings.” While air conditioners are attached to walls, they are removable and can be fitted elsewhere, so they are not considered immovable property.
A centralised air conditioning system qualifies as a plant and machinery, not an immovable property. Therefore, the ITC restrictions under Section 17(5) do not apply to air conditioners, provided they are treated as plant and machinery and not as part of the building cost. If the air conditioner is installed in an office or factory for business purposes, ITC can be claimed, ensuring it is accounted for correctly as plant and machinery.
FAQs
Q1. How much GST on AC?
GST on AC is currently charged at 28%. This is 14% of CGST and 14% of SGST for intrastate transactions and 28% of IGST for interstate transactions.
Q2. Is GST Applicable for Imported Air Conditioners?
Yes, GST is applicable to imported air conditioners in India. The government has imposed a high import duty on air conditioners to encourage the sale of locally manufactured goods. This move aims to reduce reliance on imported components and promote domestic production.
When importing air conditioners, the following taxes are applied:
- Basic Customs Duty (BCD): 20% of the assessable value.
- IGST: 28% of the assessable value, in addition to the basic customs duty.
- Social Welfare Surcharge: 10% of the assessable value, plus the combined amount of basic customs duty and IGST.
Q3. How does GST affect air conditioner prices in India?
GST has made air conditioners more expensive by applying a 28% tax. However, it has simplified pricing by standardizing the tax across the country.
Q4. What is the HSN code for air conditioners?
The HSN code for air conditioners is 8415, with further specific codes for different types, such as split or non-refrigeration units
Q5. Can I claim GST on an air conditioner?
You can claim GST on an air conditioner if it is used as a fixed asset for business purposes, provided it is not excluded under Section 17(5) of the CGST Act. However, if the AC is for personal use, ITC cannot be claimed.
