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Published on:

November 15, 2024

Viraaj Vashishth

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Electrical Transformers - GST Rates & HSN Code 8504

An electrical transformer is a power transmission and distribution apparatus that is widely used in electricity supply networks. It is vital for the businesses like manufacturers, distributors, and other stakeholders operating in this segment to comprehend the tax particulars on electrical transformers specifically the GST on HSN Code 8504. There is a discussion on classifications according to transformer HSN CODE 8504, GST rates, areas of compliance, and the effects on the industry in this paper.

Electrical Transformers

The term “Transformer “or an “Electrical Transformer” describes a device used to transfer electric energy between circuits with the help of electromagnetic induction. Transformers help to range the voltage at optimum levels appropriate for transmission over long distances, thereby enabling efficient power distribution in transmission systems in both industrial and domestic users.

Types of Electrical Transformers:

1. Power Transformers: Designed for high-voltage parts of the transmission network.

2. Distribution Transformers: Mostly used to supply voltage to end-users but can also be used for step-down.

3. Isolation Transformers: Hence used to separate the sections of a power system from one another.

What is HSN Code 8504 for Electrical Transformers?

Defining the HSN Code System.

The Harmonized System of Nomenclature which is also termed as HSN is the evolved version of a conventional coding system that is used around the world for the purpose of product identification. It helps ensure and expedite the calculation of taxes and duties by providing a common standard of reference.

GST Rates on Electrical Transformers

The GST rate for electrical transformers under 8504 HSN Code is set at 18%. This rate applies uniformly across transformers, static converters (e.g., inverters), and inductors. The table below provides an overview of the rates:

HSN Code	Description	Rate (%)	Effective Date	Rate Revision
8504	Electrical Transformers, Static Converters (For Example, Rectifiers) And Inductors	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
850410	Ballasts For Discharge Lamps Or Tubes	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85041010	8504 Electrical Transformers, Static Converters (For Example, Rectifiers) And Inductors -Ballasts For Discharge Lamps Or Tubes: Conventional Type	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85041020	For Compact Fluorescent Lamps	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85041090	Other	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042100	Having A Power Handling Capacity Not Exceeding 650 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042200	Having A Power Handling Capacity Exceeding 650 Kva But Not Exceeding 10,000 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
850423	Having A Power Handling Capacity Exceeding 10,000 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042310	Having A Power Handling Capacity Exceeding 10,000 Kva But Not Exceeding 50,000 Kv	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042320	Having A Power Handling Capacity Exceeding 50,000 Kva But Not Exceeding 1,00,000	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042330	Having A Power Handling Capacity Exceeding 1,00,000 Kva But Not Exceeding 2,50,00	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85042340	Having A Power Handling Capacity Exceeding 2,50,000 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85043100	Having A Power Handling Capacity Not Exceeding 1 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85043200	Having A Power Handling Capacity Exceeding 1 Kva But Not Exceeding 16 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85043300	Having A Power Handling Capacity Exceeding 16 Kva But Not Exceeding 500 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85043400	Having A Power Handling Capacity Exceeding 500 Kva	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
850440	Static Converters	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044010	Electrical Transformers, Static Converters (For Example, Rectifiers) And Inductors -Static Converters: Electric Inverter	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044021	Rectifier: Dip Bridge Rectifier	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044029	Other	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044030	Battery Chargers	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044040	Electrical Transformers, Static Converters (For Example, Rectifiers) And Inductors -Static Converters: Voltage Regulator And Stabilizers (Other Than Automatic)	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85044090	Other	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
850450	Other Inductors	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85045010	Choke Coils (Chokes)	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85045090	Other	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
850490	Parts	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85049010	Electrical Transformers, Static Converters (For Example, Rectifiers) And Inductors - Other Inductors: -Parts : Of Transformers	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%
85049090	Other	5/18	01/08/2019 15/11/2017 1/07/2017	5% omitted from 28% 18%

Sub-classifications under 8504:

The sequential progression of every subdivided HSN Code 8504 is unique and helps manufacturers and sellers to ascribe identical numbers to the goods. For instance, transformer HSN code 8504.21 applies only to small less than 1kVA rating transformers while 8504.23 applies to transformers rated from 16kVA to 500kVA. This classification enables companies to know the relevant VAT rates their products will incur.

You can also read: Electric Motors and Generators HSN Code & GST Rate - 8501

Taxation and Revenue Collection:

It should be noted that most of the transformers may be found in the 18 percent GST slab, others electrical equipment may be found at different rates. This makes it easier for businesses with schemes concerned with various transformer types that the Code 8504 HSN provides a single rate.

Input Tax Credit (ITC) Conditions:

Purchasers of transformers classified under HSN Code 8504 are entitled to Input Tax Credit (ITC) of the GST paid, provided they meet the ITC requirements. Toward Pillar 6, this credit functions as a relief to tax that lowers the strain on cash flow and allows for easier redeployment of resources into business.

Compliance and Documentation

Billing Requirements under GST:

Invoices should be marked HSN Code 8504 which explains the type of the product. Proper classification of transformers and transformers’ appliances is important so that correct taxation is calculated and there are no conflicts regarding such classification. The statement regarding GST is also important in order to avoid non-compliance.

Important Compliance Points:

1. The product categorization should be in conformance with 8504 HSN code description.

2. It is important to keep records of transformer purchases and sales respective to GST Returns.

3. More so, if wrong classifications are affected there may be penalties. It is therefore imperative that the HSN categorization takes precedence.

Covering Requirements for GST E-way Bill:

An e-way bill is required for the transport of transformers which are greater than 50 kilometers. This bill must mention HSN Code 8504, quantity of the products and the rate of GST applicable. Proper recording of these details can avoid undue delays during transport and ensure a fair logistic process.

Impact of GST on Transformer Industry

Cost Implications:

Due to an 18 % GST imposed on transformers, buyers will be affected in terms of pricing while local manufacturers will also feel the effects in their production costs. Competitive pricing is likely for large-scale distributors as ITC eligibility is likely to relieve some cost pressure.

Encouragement for Domestic Production:

The GST upper range limit seeks to facilitate transformers and other auxiliary equipment production within the country. The GST system is hoped to increase investment in domestic manufacturing, lower imports of transformers and enhance India’s backbone infrastructural capacities through provision of clear tax instructions and guidance.

Global Comparison:

It is observed that the rate of GST on electrical transformers in India is moderate compared to other countries, especially when attempts are made to stimulate growth without neglecting revenue generation. Generally, countries with similar types of VAT or GST on electrical goods have rates of 15-20% and above.

Case Studies and Practical Scenarios

Example Calculations:

In order to determine the effective GST on payment of INR 50,000 towards a transformer, the 18% GST rate can be applied while determining its effective cost.

GST Calculation:

1. Cost of Transformer: INR 50000

2.. GST Rate: 18%

3. Amount of GST: 50000 x 0.18 = 9000 INR.

4. Total Cost: 50,000 + 9,000 which is equal to 59,000 INR

Industry Use Case:

In the case where a manufacturer of a transformer sells its products to a distributor in the supply chain, he is liable to pay the GST rate of 18%.The distributor, eligible for ITC, can claim credit for the GST paid to the manufacturer, reducing their tax burden.

Conclusion

To conclude, the HSN Code 8504 is complete in its classification and applies to transformers and other electrical equipment, taxable at an 18 percentage GST rate. An enhanced comprehension of the HSN functions, compliances, and ITCs can not only assist in business performance but also make it easier for the local transformer industry. It follows that for businesses operating in this tax framework in India, these tax requirements assist in compliance, and more so, improve business performance and competitiveness in the market.

FAQs

1. Which HSN code is for electrical transformers?

The 8504 code is used for electrical transformers.

2. What products are included under 8504 HSN Code?

HSN code 8504 is for Electrical transformers and static converters (inverters, rectifiers), and inductors.

3. What is the GST rate for transformers under HSN Code 8504?

The GST rate applicable to transformers falling under 8504 HSN code is 18%.

4. Is the GST rate for inverters the same as that of transformers?

Inverters which are under inverter HSN code and GST rate also are covered within HSN 8504 and are rated at 18% GST as well.

5. What is the transformer HSN code and gst rate for power transformers of less than 1 kVA?

The transformer HSN for power transformers of less than 1 kVA is 8504.21 and its GST rate is 18%.

6. Does 8504 HSN Code cover any parts of transformer types?

Yes, 8504 HSN code description covers various elements and parts associated with transformers.

7. What will be the effect of the GST rate on the transformer prices?

The 18 % GST rate for transformer HSN codes and GST rate has an influence on the end cost of transformers to be purchased.

8. Do businesses registering for Input Tax Credit (ITC) get tax credit again on transformers?

Yes, business entities who acquire transformers with under codes 8504 HSN code can get ITC.

9. What is the HSN code of inverters in which static converters are made up of HSN code?

Inverter HSN code is also included in the HSN 8504.40 and is charged an 18% rate.

10. Are there any papers required to be submitted concerning this demand CBEC (transformer HSN code) compliance?

To maintain compliance, invoices should state the description of the 8504 HSN Code, category of the product and relevant GST rate to avoid tax miscalculation.