Polymers Vinyl Acetate: GST Rates and HSN Code 3905 Guide

Vinyl acetate polymers find extensive application in various sectors, such as adhesives, paint, lacquer, packaging, textiles and construction. Therefore, it is imperative that businesses that sell these items have a proper classification of their products under the HSN number and the correct rate of GST applied to them to prevent complications and fines as a result of non-compliance with Indian GST legislation.

What Are Polymers of Vinyl Acetate

The vinyl acetate polymer industry as an industrial polymerisation of the vinyl acetate monomer industry creates polymers that will be in high demand and used for many different industries through the vinyl acetate polymerisation. These polymers are going to be used as raw materials and finished products and will be manufactured to meet specific standards based on their properties for industries to utilize. The following listing indicates some introduction(s) to where vinyl acetate polymers are being manufactured.

As adhesives and sealants for use in packaging and woodworking, as well as for the construction industry.

As binders for emulsions (paint/coating) to aid film forming.

To improve the quality (strength and finish) of textiles during finishing.

As coatings and surface treatments for paper/packaging materials.

As construction industry chemicals, (i.e., waterproofing agents, bonding agents).

Vinyl acetate polymers are generally provided in primary forms including granules, powders, pellets and aqueous emulsions, which will then undergo further processing to produce finished products. Only the primary forms are assigned under HSN Code-3905 under GST.

Refer this: GST Rates and HSN Code 3925 for Builders' Ware Plastics

HSN Code for Polymers of Vinyl Acetate

Polymers based on Vinyl Acetate fall under Chapter 39 Polyester or Plastics & Their Products according to the GST Tariff structure. This section provides for all types of synthetic polymers that have been created from various raw materials and that are offered in Primary Form. According to the GST Tariff, when polymers based on Vinyl Acetate are sold in Primary Forms, they will be assigned the HSN code 3905.

HSN Code 3905 applies to vinyl acetate-based polymers or copolymers that are supplied in the shape of primary raw materials (granules / powders); Secondary forms include pellets, flakes & Aqueous Emulsion. This code does not include all finished products nor any processed and or converted manufacturing items (Adhesives, paint/coating) which are classified in Additional HSN Code(s). Classification of these products as HSN 3905 is essential to ensure that the correct rate of GST is applied, that invoices are created correctly, and that compliance with Input Tax Credit (ITC) occurs without disruption.

Refer here: GST rates and HSN code for Other Plastics Materials 3926

GST Rate on Polymers of Vinyl Acetate (HSN 3905)

Under the Goods and Services Tax (GST) regime, polymers of vinyl acetate are classified under harmonized system number (HSN) code 3905 and are placed in the 18% GST tax rate when being sold/distributed as "primary form" products. The GST rate is uniform everywhere in the country and applies to inter-state movement (transportation) as well as Domestic Supplies.

With respect to intra-state movement (transportation), the total GST tax rate of 18% is divided evenly into 9% CGST and 9% SGST. When moving (transporting) between different states or when importing products, the Integrated GST "IGST" tax rate of 18% is applicable. Companies engaging in the manufacture, distribution, and/or import of Polymers of Vinyl Acetate must use the correct tax rate (s) in their tax invoices to ensure compliance with the GST law and facilitate GST Input Tax Credit (ITC) claims.

Input Tax Credit (ITC) Availability

A business engaged in the manufacture of polymers and the sale of the same shall be entitled to claim Input Tax Credit on the GST paid provided that all applicable requirements have been met. Below are the key requirements:

Goods that are used for taxable supplies

The polymer products must be used in the course of conducting business to make taxable sales. Input Tax Credit will not be granted if the polymer products are used only for making exempt or no GST supplies.

Proper Tax Invoice

The buyer must hold a valid tax invoice from a registered supplier which includes all of the required information (GSTIN, HSN code, taxable amount and GST amount).

Use should have been reported on GSTR-1

The supplier is required to report the supply on their GSTR-1 and thus have made the supply with all necessary compliance to the GST authority.

ITC must be indicated in GSTR-2B

Input tax credits may only be claimed on invoices that have been automatically populated in the recipient's GSTR-2B. The GSTR-2B is the basis on which the Recipient will be able to claim an ITC.

ITC claims must be made before the due date of filing GSTR-3B

A recipient must file their GSTR-3B by the due date in order to take advantage of any available credit.

Common Uses and GST Impact

Industry	Usage	GST Impact
Paints & Coatings	Binder and emulsion	18% GST
Adhesives	Base polymer	18% GST
Construction	Waterproofing chemicals	18% GST
Textiles	Fabric finishing	18% GST
Packaging	Paper & board coating	18% GST

Importance of Correct HSN Classification

GST compliance issues may arise if Polymers of Vinyl Acetate are incorrectly classified.

Incorrect Application of GST Rate - Incorrect application of the HSN Code, could result in the incorrect application of GST rates, which may result in the IRS looking for either short collections of tax or excess collections of tax during an audit.

Demand Notices and Penalty - The IRS can issue a demand notice for short paid taxes and levying a Penalty for incorrect classification under the GST Act.

Restrictions on Input Tax Credit (ITC) - Reporting of Incorrect HSN can create a mismatch in the return of your GST. This mismatch can produce a result of rejection or reversal of the eligible ITC.

Interest Liability under GST - If the GST is underpaid, the IRS can assess an interest charge on the underpayment from the due date of the GST to the date it is paid.

To protect yourself and your clients from these possible issues when selling 'Polymers of Vinyl Acetate' in Primary Form, classify them under HSN Code 3905. This will ensure that you have no problems with GST Compliance.

Conclusion

Vinyl acetate, referred to as polymers of vinyl acetate, are subject to 18% Goods and Service Tax (GST) in India, along with their classification using other types. Polymers of vinyl acetate are used in many industries and are therefore important for manufacturers, importers, and traders to comply with the relevant HSN classifications in India through correct invoicing and timely filing of returns to avoid any potential disputes regarding Input Tax Credits (ITCs).