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Published on:

January 28, 2025

Udeetta Sarma

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Basics of GST

GST rates and HSN code for Goods Motor Vehicles 8704

The introduction of Goods and Services Tax (GST), and its subsequent implementation resulted in a seamless indirect tax structure, contributing immensely towards ease of doing business and tax compliance. The correct GST rates and HSN (Harmonized System of Nomenclature) codes are essential for businesses that provide motor vehicles for the freight transportation industry.

This blog covers the GST rates, HSN Code 8704 &its applicability for the goods motor vehicles & transport services throughout India.

What is HSN Code 8704?

HSN Code 8704Chapter 87HSN description is "Vehicles other than railway or tramway rolling stock, and parts and accessories thereof." Arrival cars: Goods carriage motor vehicle – HSN 8704 This includes:

Light Commercial Vehicles (LCVs)
Table of contents 300 Heavy Commercial Vehicles (HCVs)
Tippers and dumpers
Refrigerated van delivery of perishable items

The code simplifies trade by establishing a uniform system for product identification, thereby promoting consistency in both domestic and international markets.

Key Categories Under HSN Code 8704

The subcategories under HSN Code 8704 cover a range of vehicles:

HSN Code	Description
870410	Dumpers designed for off-highway use
870421	Motor vehicles for goods transport, with a gross vehicle weight not exceeding 5 tons
870422	Motor vehicles for goods transport, with a gross vehicle weight exceeding 5 tons but not exceeding 20 tons
870423	Motor vehicles for goods transport, with a gross vehicle weight exceeding 20 tons
870431	Motor vehicles with spark-ignition internal combustion engines, used for transporting goods

GST Rates for Goods Motor Vehicles (HSN 8704)

GST rates on goods transport vehicles depend on the type and usage of the vehicle. As of now:

Taxes on Goods Transport Vehicles:

GST is usually 18%. This rate will be applicable for the majority of motor vehicles falling under HSN 8704, such as trucks, tippers and refrigerated vehicles.

Special Purpose Vehicles:

Implementation vehicles that are not used for commercial use such as off-road dumpers are chargeable on GST 28%.

GST on Electric Goods Transport Vehicles:

The GST is lower, mainly 5% to encourage sustainability on electric vehicles.

Input Tax Credit (ITC) Benefits

Businesses purchasing goods and motor vehicles for their operations may be eligible to claim ITC under GST. However, the eligibility depends on the vehicle's use. For instance, ITC is not allowed for passenger vehicles but is applicable for goods vehicles used in business operations.

You might also be interested in learning about GST on Used Cars.

Importance of HSN Code 8704 for Transportation Businesses

Simplified Tax Compliance

Proper use of the HSN code helps in compliance with GST rules and regulations and checks and fines. Incorrect classification can result in overpaying taxes or compliance issues.

Uniformity in Trade

Anything that has a uniform HSN code makes it easy even for interstate trades. It removes confusion in tax rates and simplifies transactions.

Transparent Supply Chain

A proper HSN code system helps the business in tracking goods in the supply chain maintaining transparency.

Goods Transport HSN Code and Taxation

Besides, businesses engaged in the transportation of goods should also be aware of taxation concerning transportation services in addition to vehicles under HSN Code 8704. In the case of transport of goods by road, the GST rate is 5% without input tax credit (ITC) benefit, or 12% if ITC is availed.

Exemptions in GST for Goods Transport Services

Some Goods Transport Services are exempt from GST:

Movement of food grains, milk, or agricultural produce
Transport of Newspapers and Magazines
Railway or inland waterway services not operated by air-conditioned trains

How to Determine the Right HSN Code and GST Rate?

Businesses should analyse their vehicles’ specifications and intended usage to determine the right HSN code and corresponding GST rate. Here’s a quick checklist:

1. Determine Vehicle Type:

Know what type of vehicle is a standard goods transport vehicle, a special-purpose vehicle or an electric vehicle

2. Verify Gross Vehicle Weight:

The gross vehicle weight of the motor vehicle is one of the subcategories under HSN Code 8704.

3. Evaluate Usage:

ITC can only be claimed if the vehicle is used for business.

HSN Code for Transportation Services

While HSN Code 8704 applies to vehicles, transportation services also have designated HSN codes:

9965: For goods transportation by road or water
9967: For cargo handling services

Impact of GST and HSN Code 8704 on the Commercial Vehicle Industry

The GST and standardised HSN codes have had a far-reaching impact on the commercial vehicle sector:

Reduced Number of Taxes

GST has replaced many taxes, so businesses have less compliance burden.

Lower Logistics Cost:

Uniform tax rates across states have drastically reduced logistics and transportation costs.

Facilitated Adoption of Technology:

The simplicity of claiming ITC has encouraged enterprises to adopt new technology (electric vehicles, etc.) to increase the efficiency of operations.

Challenges Faced by Businesses

While there are merits for businesses, there are also challenges associated with GST and HSN Code 8704:

Vast Compliance Hurdles:

Identifying the appropriate HSN code and relevant GST rate is a challenge for SMEs.

Frequent Changes in Policies:

Businesses need to keep up with updates regarding changes in GST rates or GST rules.

ITC Limits:

While ITC can be claimed if goods are transported in a vehicle, restrictions for other vehicles can impede cash flow.

Future Trends in GST and HSN Code 8704

With the government formulating and refining GST policies over time, the commercial vehicle segment may expect:

GST reduction for Electric Vehicles:

GST rates for electric goods vehicles will be lowered substantially.

Tech Inclusion:

Heavy reliance on digital tools to streamline compliance and guarantee correct HSN classification.

Policy Changes:

Updates might permit more exemptions or benefits for sustainable and specialized transport vehicles.

GST and HSN Compliance Made Easy with Swipe!

Need clarity on GST rates/HSN codes of your vehicles and Goods? Swipe can bring tranquillity to your business! Our platform comes with GST-compliant invoicing and prefilled HSN code classification is a perfect match for transportation and logistics companies. Real-time tax calculations, inventory tracking, financial reports — everything in one place. Count yourself among the thousands of businesses in India already taking advantage of Swipe's powerful features.

Conclusion

Accurate vehicle classification helps businesses stay compliant, lowers the risk of costly tax errors, and raises efficiency. Transportation firms and vehicle dealers can save costs by more efficiently managing their fleets if they keep abreast of GST rules and utilise ITC advantages. In India's booming transport sector, companies can streamline GST compliance and operations using digitization and by being transparent.

FAQ

1. What is HSN Code 8704?

HSN Code 8704 is for motor vehicles for the carriage of goods (trucks, tippers, refrigerated vehicles). It is based on weight and type.

2. What are the tax rates in GST for goods and motor vehicles?

Motor Vehicles are subject to GST at the general rate of 18%. Rates for vehicles like special-purpose vehicles and electric ones have different percentages like 28% or 5%.

3. How do I find the original HSN code for my commercial vehicle?

To get the accurate HSN code, refer to the gross weight and the type of vehicle. These codes are often broken down by weight and feature, for example, HSN 870421 is assigned to a vehicle under 5 tons, while HSN 870423 is assigned to a vehicle over 20 tons.

4. ITC on goods motor vehicles. Can I avail of it?

However, goods and motor vehicles are taxed under GST when used for transport by businesses. However, ITC does not apply to passenger vehicles that are used for personal use.

5. What is the influence of GST on the Transport Sector in India?

It has unified tax rates across states simplifying the tax compliance for the transportation industry. It has lowered logistics costs and prompted enterprises to embrace digital solutions to enhance tax compliance and improve efficiencies.