GST on Air Conditioners: AC GST Rate and HSN Code

GST on air conditioners was initially levied at the highest tax slab, with most electronic goods seeing a reduction in rates. However, air conditioners and large-screen TVs remained unchanged until the 56th GST Council meeting, where key updates were made to adjust the tax structure for these items, improving affordability.

Key Takeaways

The 56th GST Council meeting has announced important updates with changes effective from 22nd September 2025:

• GST on air-conditioning machines has been reduced from 28% to 18%.

How did the Prices Change after GST on Air Conditioners?

Before GST, consumer durables such as air conditioners were subject to VAT and excise duty together, adding roughly 23%–27% (varying by state) tax. Under GST, ACs were initially taxed at 28%, which raised retail prices. Following the 56th GST Council decision, the GST rate on air conditioners is now 18%. Assuming businesses pass through the cut, post-GST prices should fall compared to both the earlier 28% regime and many pre-GST scenarios.
The price comparison pre and post-GST are shown below:

*Assumed to be 14%. VAT depended on the state of transaction. Hence, with 18% GST, consumers pay ₹7,000 less than under 28% GST.

Applicability of GST on Air Conditioners

GST applies to most electronic goods, including air conditioners. After the 56th Council’s rate rationalisation, India now broadly uses two slabs: 5% for essentials and 18% as the standard rate (with a separate 40% “demerit” slab for sin/luxury items). Air conditioners are now subject to 18% GST (down from 28%), effective September 22, 2025. With rising temperatures and changing consumer needs, ACs are no longer treated as a luxury in taxation; they’re taxed at the standard 18% slab alongside other appliances.

What is the Value of Supply to Compute GST on Air Conditioners?

Under GST, supply is considered as a taxable event. Supply includes all kinds of sales, exchange, transfers, rentals, leases and disposals. 

Value of supply= Transaction value 

The transaction value is the price paid/payable for the supply of goods or services. In the case of sale of air conditioners, the supplier of air conditioner also provides installation services in most cases. Thus, both supplies of air conditioner and its installation are naturally bundled and supplied with each other in the ordinary course of business. Therefore, it is a composite supply. The principal supply of air conditioner and its installation charges are coincidental.  Value of supply = sale value + installation charges

GST Rate on Air Conditioners and HSN code

All air-conditioning machines under HSN Chapter 8415 are taxed at 18% as per the 56th GST Council (effective 22 Sep 2025)

Availability of ITC on Air Conditioners and Reversal

Under GST, every registered person is eligible to claim ITC on purchase of goods/services intended to be used in the course of furtherance of business. But, section 17(5) restricts ITC on goods/services received by a taxable person for construction of immovable property other than plant and machinery on his account for use in the course of furtherance of business.

Now, let us first understand what an immovable property is. Section 3(26) of the General Clauses Act, 1897 defines immovable property as “things attached to the earth or permanently attached to the walls and building”. Although air conditioners are attached to the walls, they can be removed and fitted elsewhere. It is not immovable property. A centralised AC system is considered a plant and machinery and not immovable property, and thus restrictions u/s 17(5) should not apply. However, it should be ensured that the cost of the air conditioner should be separately booked as plant and machinery and not included in the building cost. Further, if the AC is installed in an office/ factory for business purposes, ITC can be available. However, if the supply includes taxable and exempt goods, then ITC reversal should be done as per Rule 42 and Rule 43 of the CGST Rules.

Note about GST on the Import of Air Conditioners

The government has kept a high import duty on air conditioners to promote the sale of local goods. The increase in import duties is intended to discourage Indian companies from importing components from outside India instead of replacing them with goods manufactured in India. The taxes listed below apply to the import of air conditioners:

• Basic customs duty at 20% of the assessable value
• IGST at 18% of the assessable value + basic customs duty
• Social welfare surcharge at 10% of the assessable value + basic customs duty + IGST amount

Availability of GST Exemptions

Right now there are no exemptions available under GST on the sale of air conditioners.

Impact of GST on Air Conditioners' Prices

Under VAT, consumer durables were taxed at approximately 12.5%–14.5% (state-wise) plus 12.5% excise duty and cess—resulting in air conditioners often facing an overall burden of 25%–27%. Under GST, the rate on air conditioners has been reduced to 18% (from 28%), which—if fully passed through—lowers the final price compared to the previous 28% slab.

Benefits: The main benefit is that now manufacturers/dealers can claim ITC on raw materials. Thereby removing the cascading effect of taxation. 

Conclusion: Keeping basic electronic appliances like air conditioners under the 18% slab shows that it is still considered a luxury item instead of necessity. The increase in tax rates and increasing inflation will, therefore increase the prices of air conditioners.