CLASSIFICATION OF GOODS AND SERVICES - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

7. CLASSIFICATION OF GOODS AND SERVICES 7.1. Classification is the categorization of goods and services crucial to ascertain whether a subject matter is eligible to tax, exemption and the rate of tax. 7.2. Under GST, all goods and services transacted in India are classified as per the HSN (Harmonised System of Nomenclature) code system or SAC (Services Accounting Code) system. 7.3. HSN code number is an internationally adopted commodity description and coding system developed by the World Customs Organization (WCO). With the HSN code acting as a universal classification for goods, it is adopted for classification of goods under GST and levy of GST. 7.4. There is no separate dedicated Tariff Schedule under GST. However, for the purpose of classification, Customs Tariff has been adopted. The goods are classified from Chapter 1 to Chapter 98A. Services are classified under Chapter 99. 7.5. The rate of GST on goods have been prescribed in Notification No. 1/2017-CT (Rate) dated 28.06.2017 and 1/2017-Integrated Tax (Rate) dated 28.06.2017, as amended. The list of goods contained in the said notification provides the description of goods, Chapter/Heading/sub-heading/Tariff Item number and the applicable tax rate mentioned against each goods. Thus, Notification No. 1/2017-CT (Rate) and 1/2017-Integrated Tax (Rate) is useful for determining the appropriate classification of goods and the applicable tax rate. 7.6. As per the said Notifications, the following six GST rate slabs are presently applicable for goods (i) 5% (2.50% CGST + 2.50% SGST) in respect of goods specified in Schedule I of the Notification, (ii) 12% (6% CGST + 6% SGST) in respect of goods specified in Schedule II of the Notification, (iii) 18% (9% CGST + 9% SGST) in respect of goods specified in Schedule III of the Notification, (iv) 28% (14% CGST + 14% SGST) in respect of goods specified in Schedule IV of the Notification, (v) 3% (1.50% CGST + 1.50% SGST) in respect of goods specified in Schedule V of the Notification, and (vi) 0.25% (0.125% CGST + 0.125% SGST) in respect of goods specified in Schedule VI of the Notification. 7.7. Notification No. 2/2017-CT (Rate) and 2/2017-Integrated Tax (Rate), both dated 28.06.2017 provides list of goods fully exempted from levy of CGST/IGST. 7.8. Services are classified under Chapter 99 of the HSN. This Chapter provides the description of services, Sections, Headings and the notified tax rates. Notification No. 8/2017-Integrated Tax (Rate), dated 26.06.2017, as amended, prescribes GST rate of the services. There are six slabs of tax rates prescribed Nil, 5%, 9%, 12%, 18% and 28%. With effect from 01.04.2019, the rate of tax for some construction services is 1.50% and 7.50%, subject to fulfilling the conditions prescribed. 7.9. The explanatory notes published by GST Council indicate the scope and coverage of the heading, groups and service codes of the Scheme of Classification of Services, which can be used as a guiding tool for classification of services. 7.10. The rates applicable to any goods or services are published by CBIC and can be viewed on https://cbic-gst.gov.in/gst-goods-services-rates.html.