GST On Tyres: Applicability, Tax Rates and HSN Code

Automobile tyres mostly use natural rubber as inputs. However, applicable GST rates on tyres vary significantly compared to other rubber-derived finished products, like gloves, latex threads, etc. In addition, GST rates on different tyres also differ widely. This article discusses the applicability of GST rates and HSN codes of various kinds of tyres.  

What is the GST on Tyres? 

Before the introduction of GST, tyre manufacturers, dealers and traders had to deal with multiple types of indirect taxes.

• Pre-GST, basic customs duty (BCD) for importing natural dry rubber was around 20%.
• Post-manufacturing, Original Equipment Manufacturers (OEMs) were required to pay Value Added Tax, Central Excise, etc. 
• Dealers and traders paid state-specific taxes such as sales tax and octroi.

GST unified all these different taxes with a single tax structure throughout India. For GST applicability purposes, tyre as a product segment is further categorised, with specific HSN for each category, 

• Car (4-wheeler) tyres 
• Non-motorised bicycle tyres 
• Motorised 2-wheeler tyres 
• Bus and commercial vehicle tyres 
• Tyres used in agricultural-use vehicles 
• Aviation tyres 
• Retreaded second-hand or used or recycled tyres 

GST Rate and HSN Code for Tyres 

Different categories of tyres as finished products with different HSN codes are: 

Input Tax Credit (ITC) for Tyres 

ITC is one of the significant pillars of GST. Hence, taxpayers must be well-versed in the provisions of claiming the correct ITC because failing to do so can lead to notices and penalties. Here is a step-by-step guide for claiming ITC while purchasing tyres. 

• First of all, ITC is available only to GST-registered entities.  
• The second key eligibility for claiming ITC is business usability. For example, a truck fleet owner can claim ITC for GST paid on the purchase and repair of truck tyres. However, the same owner cannot claim GST credit while purchasing tyres for their personal use car. 
• ITC is not allowed on tyre-related expenses in private passenger vehicles. 
• A cab operator can claim ITC on tyre-related expenses if the operator collects GST on their cab rental services. However, the operator cannot claim ITC operating under a cab aggregator. For example, a cab owner affiliated with Ola, Uber or similar app-based aggregators does not charge or collect GST from passengers directly. Instead, the app-based aggregating company pays the cab-owner a commission. So, such a cab owner cannot claim ITC on GST paid on tyres for their cab.   
• Registered dealers and traders of new and retreaded tyres can claim ITC, provided they collect GST from their customers. 

GST on Tyre-related Services 

Retreaded tyres attract a flat GST at an 18% rate. So, if the value of the tyre includes a retreading-related service charge, then the services also attract 18% GST. If any registered entity charges for tyre repair and maintenance services, then the HSN code will be 9987, and the applicable GST rate will be 18%. 

Impact of GST on Tyre Industry 

For Consumers: 

• A uniform tax rate under GST across India has removed confusion regarding the taxation component in tyre prices.

For Manufacturers: 

• The single-rate taxation system under GST removed the accounting complexities.  
• Manufacturers are experiencing faster disbursement of tax credits.  
• Pre-GST, some states offered production-linked tax subsidies to manufacturers, making manufacturing cheaper in those states. But now, manufacturers can set up production units anywhere in the country and enjoy the same tax rate. 

For Dealers and Traders: 

• They can claim ITC on GST paid on the purchase of their stocks. 

Read more:
GST on Electric Vehicles (EVs)
GST on Motor Cars and Light Motor Vehicles