Tea HSN Code: A Guide to Determining the GST
Updated: Aug 2
It's critical for small businesses that deal with tea to have a solid understanding of the HSN codes that apply to them. A set of alphanumeric or numeric codes assigned to a certain product is known as an HSN code. Every code is associated with a certain product, category, and subcategory. The classification is more precise the longer the code. There is a hierarchical structure to the HSN codes. Tea is HSN code 902 in classification. Chapter 9, which includes tea, coffee, mate, and spices, is represented by the first two digits of the code 9. The product itself is represented by all six digits. In this article, we will explain the importance of the HSN code of tea for businesses dealing in it.
Table of Contents
HSN Code for Tea
The following table illustrates the HSN codes for different tea products and the GST rates applicable to them.
Objective of HSN Code
In India, it is necessary to identify and provide an appropriate HSN code in order to comply with GST laws. The GST rate that applies to any good or service is determined by the HSN code. Inaccurate taxation resulting from inaccurate coding may incur fines and penalties.
According to Indian tax authorities, HSN codes must be used on invoices. There may be fines and legal repercussions if the HSN codes are omitted or included incorrectly.
Proper HSN code classification keeps products and services from being overtaxed or undertaxed. Precise tax computations result from applying the correct code, which guarantees that the correct GST rate is applied.
Customs officials in India use the HSN code to determine the import or export tariffs associated with items when they import or export. Appropriate coding lowers the possibility of delays or disagreements while streamlining the customs process.
Precise HSN code reporting is essential for record-keeping and auditing. It guarantees that companies can produce accurate and verifiable transaction records upon request.
Classification of Tea Under HSN Codes
Types of Tea:
Black Tea: This is fully fermented tea known for its robust flavor and dark color. Under HSN code 0902, black tea is categorized as a fermented tea with distinctive characteristics, such as its deep color and stronger taste compared to other types of tea.
Green Tea: Unlike black tea, green tea is not fermented, resulting in a lighter color and a more subtle flavor. It falls under the same HSN code (0902) but is specifically classified under "0902.10" to distinguish it from black tea and other variants.
Herbal Tea: Herbal tea, which is technically an infusion rather than true tea, is made from herbs, flowers, or fruits. It is also classified under HSN code 0902 but may have different subcategories based on its composition and preparation method.
Forms of Tea:
Loose Leaf Tea: This form includes bulk tea leaves without any packaging. It is categorized under HSN code 0902, specifically classified by its type and preparation.
Tea Bags: Pre-packaged for convenience, tea bags are also classified under HSN code 0902. The packaging method is noted in the sub-classification but does not affect the GST rate.
Instant Tea: This is a powdered form of tea, designed for quick preparation. Instant tea is included under HSN code 0902 but may have a specific subcategory depending on its processing and packaging.
GST Rates for Tea Based on HSN Codes
Standard GST Rate:
The GST rate for tea under HSN code 0902 is generally set at a standard rate, which may vary depending on the type of tea and its form. Businesses must apply the correct GST rate based on the specific classification of the tea.
Variation in Rates:
Different types of tea and their forms can attract varying GST rates. For example, while the rate for loose leaf tea and tea bags might be similar, instant tea could have a different rate due to its processing and packaging. The variation helps in distinguishing between products with different market values and production costs.
Impact of GST Rates on Pricing:
GST rates directly influence the retail and wholesale pricing of tea. Higher GST rates can lead to increased costs for consumers and businesses. Companies need to factor in these rates when setting prices to maintain profitability while ensuring compliance with tax regulations.
Compliance and Documentation for Tea
Invoicing Requirements:
Invoices for tea products must include specific details to ensure GST compliance, such as the HSN code, the GST rate applied, and the total tax amount. Accurate invoicing helps in proper tax reporting and avoiding legal issues.
GST Registration:
Businesses involved in the sale or distribution of tea must register for GST. This registration is crucial for collecting tax from customers and claiming input tax credits. Compliance with GST registration requirements ensures smooth business operations and adherence to tax laws.
Input Tax Credit (ITC):
Businesses can claim Input Tax Credit (ITC) on tea purchases, which allows them to offset the tax paid on inputs against their tax liability on sales. Proper documentation and accurate filing are essential for managing ITC and optimizing tax benefits.
How to Find the Right HSN Code for Your Product
For GST compliance and precise tax calculation, it is crucial to find the correct HSN code, such as the one for tea that was previously explained. Here are several methods for locating your product's correct HSN code in India.
The official website for GST The official GST webpage is the main resource for proper HSN codes. Go to the "Search HSN Code" option under "Services > User Services" on the GST main page. There are two ways to search for HSN codes on the portal: Search By HSN and Search By Description. HSN Chapters can be searched by code in the former case, but they can also be searched by description in the latter one. To obtain the correct HSN code for your goods, select any option that makes sense for you.
While finding the HSN code on the GST portal might give you the correct results, the process can sometimes be tricky, particularly for a novice. The utilisation of a trustworthy online HSN code finding tool is a straightforward, uncomplicated, and simple format.
Challenges in Tea Classification
Complexity in Classification:
Differentiating between types and forms of tea can be complex due to the variety of products and their processing methods. Accurate classification is crucial to ensure the correct application of GST rates and avoid errors in tax calculations.
Misclassification Risks:
Incorrect application of HSN codes can lead to significant consequences, including penalties and disputes with tax authorities. Common mistakes include misidentifying the type of tea or its form, which can result in incorrect GST rates being applied.
Updates and Changes:
Changes in HSN codes or GST rates can impact tea businesses. Regular updates from government authorities may introduce new classifications or alter existing rates, requiring businesses to stay informed and adjust their practices accordingly to remain compliant.
Conclusion
To guarantee proper taxation, firms must accurately ascertain and apply the relevant HSN code to their items. For GST compliance, the HSN code is usually included in invoices and other pertinent documents. Companies need to know which HSN codes apply to their items since these codes dictate the tax rates and other legal requirements that go along with them.
FAQ
Q1. What is the full HSN code of tea?
Tea HSN code and tea powder GST rate The tea powder HSN code and GST rate is 0902; the GST rates for coffee and tea are 5%. Mate's HSN code is 0903, and its GST rate is 5%.
Q2. How Is GST calculated?
To guarantee proper taxation, firms must accurately ascertain and apply the relevant HSN code to their items. For GST compliance, the HSN code is usually included in invoices and other pertinent documents. Companies need to know which HSN codes apply to their items since these codes dictate the tax rates and other legal requirements that go along with them.
GST= (Value of Goods or Services) × (GST Rate/100)
Q3. What is the HSN code and GST rate of coffee?
The HSN code 0901 is applicable to coffee, and the GST rate is 5%.
Q4. What is HSN code 2106?
HSN Code 2106 is applicable to food mixes and soft drink concentrates.
Q5. Is coffee subject to GST?
Even if they are GST-free, all food and beverages sold at a café or restaurant, or to be consumed there, are subject to taxation. This means that whenever food and beverages are served at a restaurant or café, you are required to charge your clients GST and submit the payment to the ATO.
Q6. What is the GST on Starbucks in India?
Starbucks was fined Rs 1.04 crore plus 18% interest by the National Anti-Profiteering Authority for failing to pass on to customers the benefits of a drop in the goods and services tax rate from 18% to 5% between November 2017 and June 2018. Additionally, Starbucks was told to lower the cost of their goods.
Q7. What are the import conditions applicable to tea?
In column 3 of the ITC (HS) above (which can be accessed from the Tea Board of India website: http://www.teaboard.gov.in), there is a Policy against the Exim Code Nos. 0902 20 40 and 0902 40 60. However, the import of these items will be subject to the provisions of the Tea Waste (Control) Order, 1959 as amended from time to time. The Tea Board of India's previously mentioned Order states that only licence holders are allowed to import tea waste.
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