The HSN Code (Harmonized System of Nomenclature) is a standardized international system used for classifying goods in international trade.
It was developed by the World Customs Organization (WCO), to provide a global framework for the systematic classification of traded goods. More than 200 countries currently use the HSN codes, facilitating over 98% of world trade.
Lubricant Oil HSN Code
Lubricant oils fall under the HSN code 2710, which broadly covers petroleum oils and other oils obtained from bituminous minerals. This code helps identify the category of products, aiding in determining taxes, duties, and trade tariffs.
The meaning behind HSN Code
The HSN code system is built on a 6-digit structure. The first two digits signify the chapter under which the goods are classified, the next two represent the heading, and the final two digits denote the sub-heading. For instance, the chapter covering mineral fuels, oils, and products of their distillation, including lubricating oils, is Chapter 27. Lubricating oils, in particular, fall under 2710, a more specific heading within this chapter. Countries often add additional digits to further specify products at a national level. In India, for example, businesses with larger turnovers must report their HSN codes while filing taxes under the Goods and Services Tax (GST) regime.
History Of HSN Codes
The HSN system itself has a long history dating back to efforts in the early 20th century to standardize trade across borders. The first major step was the Brussels Tariff Nomenclature (BTN), developed by the League of Nations in 1931. This laid the foundation for further international standardization efforts, leading to the development of the Harmonized System (HS) by the World Customs Organization in 1988.
Today, the HSN system plays a crucial role in global commerce by creating a universal classification structure.
Lubricant Oil GST Rate
In addition to the HSN classification, the Goods and Services Tax (GST) rate is another key aspect of the taxation system for lubricant oils. In India, lubricating oils are subject to 18% GST rate, which is the standard rate applied to most goods and services. This means that 18% of the transaction value of lubricant oils is charged as tax.
The 18% GST rate on lubricant oils ensures a balance between affordability for businesses and consumers and revenue generation for the government. Lubricant oils are essential for multiple industries, especially in sectors like automotive, manufacturing, and energy. Hence, a moderate tax rate helps maintain a steady flow of such products in the market while still contributing to government revenues.
GST Rates In Detail
The introduction of GST in 2017 was a reform in India’s indirect taxation system, merging several taxes like VAT, service tax, and excise duty into one unified tax structure.
The purpose of the GST is to simplify the tax system, ensure transparency, and avoid the accumulative effect of taxes, which was a common issue under the previous tax regimes.
The GST regime has introduced a multi-rate tax structure, wherein different goods and services are taxed at different rates, generally classified into four main categories: 5%, 12%, 18%, and 28%. Lubricants, being crucial for industrial and individual use, have been assigned the 18% rate, which is typically applied to semi-essential or processed goods. This rate is in line with other petroleum products that are necessary for various applications but are not classified as luxury goods.
As lubricant oils are vital to the smooth functioning of machinery and vehicles, their GST rate plays a significant role in influencing pricing across many sectors