GST on Industrial Machinery: Slabs, ITC & MSME Effect
Industrial machinery is a key part of manufacturing, production, and infrastructure development. From heavy equipment in factories to precision tools in small workshops, machines drive India’s industrial growth. But how are these machines taxed? In this blog, we’ll explore the GST on industrial machinery, applicable GST rates, HSN codes, input tax credit eligibility, and how the tax structure impacts MSMEs and large enterprises alike.
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Is GST Applicable on Industrial Machinery?
Yes. Industrial machinery is classified as goods under the GST regime and is taxable at various slabs, primarily 18%. The rate may vary depending on the type of machinery, its purpose, and end use.
The government has aimed to simplify classification under the HSN system, making it easier for manufacturers, importers, and dealers to apply the correct tax rate.
GST Rate on Industrial Machinery
| Type of Machinery | Industry Use | GST Rate |
|---|---|---|
| General Industrial Machinery (Plant & Tools) | Manufacturing | 18% |
| Textile Machinery | Textile Sector | 18% |
| Printing Machinery | Publishing, Packaging | 18% |
| Packaging Machinery | Food, Pharma, FMCG | 18% |
| Agricultural Machinery (e.g. threshers) | Farming | 12% / 5% |
| Renewable Energy Devices (solar, wind) | Green Energy | 5% |
HSN Codes for Industrial Machinery
| Category | HSN Code | GST Rate |
|---|---|---|
| General machinery & mechanical appliances | 8401–8487 | 18% |
| Textile machinery | 8444–8453 | 18% |
| Agricultural machinery | 8432–8436 | 5% / 12% |
| Renewable energy equipment | 8541, 8501 | 5% |
For full classification, visit our HSN code directory.
Input Tax Credit (ITC) on Industrial Machinery
One major benefit under GST is the availability of Input Tax Credit (ITC) on the purchase of industrial machinery. Businesses can offset the GST paid on machinery against their output tax liabilities.
- Machinery must be used for business or manufacturing purposes
- Purchase must be supported by a valid GST invoice
- Buyer must be GST registered
- Machinery should not be exclusively used for exempt supplies
Impact on MSMEs and Manufacturing Sector
Positive Impacts:
- Simplified tax structure: One nation, one tax has made machinery procurement transparent.
- ITC benefit: Helps in cost savings for registered businesses.
- Encouragement for automation: Easier taxation encourages modernization.
Challenges:
- Initial cost burden: 18% GST may be a high upfront cost for small enterprises.
- Non-eligible ITC: If the machinery is used for exempted goods/services, ITC may be disallowed.
Read more about GST impact on MSMEs and how proper planning helps in better compliance.
Conclusion
The GST on industrial machinery is mostly taxed at 18%, with exceptions for sectors like agriculture and renewable energy. While this may seem high, the availability of Input Tax Credit reduces the effective tax burden for businesses. For MSMEs and manufacturers, understanding the correct HSN codes, rate slabs, and ITC provisions can lead to better cost planning and improved productivity.
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I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions (FAQs)
- What is the GST on industrial machinery in India?Most industrial machinery attracts 18% GST, while some machinery like agricultural or renewable energy equipment may have lower rates.
- Can I claim ITC on machinery purchased for my factory?Yes, if the machinery is used for business purposes and you are GST registered.
- What HSN codes are used for industrial machinery?Generally, HSN codes 8401 to 8487 cover various types of industrial machinery.
- Is GST applicable to second-hand industrial machinery?Yes, GST is applicable, but it may be under the margin scheme if the seller qualifies.
- Are MSMEs eligible to claim ITC on machinery?Yes, as long as they are GST registered and comply with ITC conditions.
