Monofilament GST Rates & HSN Code – What You Should Know Many different industries use monofilament yarns, including textiles, fishing nets, agricultural nets, and, in some instances, packaging. If you are involved with monofilaments, knowing about the GST rates and HSN code is advisable for correct tax compliance & drafting your return. This blog breaks down the GST rate applicable, HSN classification, and other compliance aspects you may want to be familiar with.
HSN Code for Monofilament Monofilaments are included in Chapter 54 of the Customs Tariff Act, which is for man-made filaments under the GST. HSN Code 5404 : This clause is specifically for synthetic monofilament of 67 decitex or more and in which no cross-sectional dimension exceeds 1 mm. These items are often referred to as monofilaments in the textile industry, fishing nets, agriculture, and packaging materials. Using this HSN code in the right way not only ensures accurate GST filing but also helps ensure that businesses can successfully file for input tax credit (ITC) for their purchases too. If a business uses the wrong HSN code, it may attract scrutiny by tax authorities, with consequences such as penalties, interest or denial of ITC claims. When talking about regulatory compliance, using the right HSN code will help ensure compliance and accuracy in financial statements.
Refer here: GST Rates and HSN Code 5402 for Synthetic Filament Yarn
GST Rate on Monofilament The GST rate on monofilament yarn fits into the overall categories in textiles and synthetic fibres. GST is categorized as follows:
1. GST Rate: 18% (Standard Rate)
2. Types: Intra-state and Inter-state
This means that whether monofilament yarn is sold within the state or between states, the same GST of 18% is imposed. This rate is levied on sales by all suppliers, manufacturers and traders dealing with monofilament yarn. Businesses should ensure the same GST rate is applied on sales invoices and in records, as well as on GST returns for compliance. Businesses that are GST-registered buyers can avail of the input tax credit (ITC) on their purchases to reduce the total tax owed.
Why Correct HSN & GST Rate Matters Picking the right HSN code and the right GST rate for monofilament is more than a compliance obligation. It has financial and legal professional implications for your company.
1. Compliance with Tax Laws The first thing GST authorities will see when they look at a product is its classification. A wrong HSN code or GST rate can result in mismatches when the GST authority is conducting audits, and perhaps will result in demand notices or disputes with the department.
2. Input Tax Credit (ITC) Accuracy Businesses often rely heavily on Input Tax Credits (ITC) allowed on purchases to lessen their overall taxation impact. If a business uses the wrong HSN code for a purchase, the ITC portion of the taxes they are entitled to deduct may be denied. If that happens, it is a cost increase at the least and may negatively affect working capital.
3. Avoiding Penalties & Interest Since a business will be behind the eight ball by underreporting taxes, they would owe the additional tax during the time GST authorities audit them for misclassification or underpaid GST portion. The business will realize this may require paying penalties and interest on the underpaid.
4. Smooth Trade Operations A purchase is made with the understanding that what is included on the invoice will be accepted as a part of a sales transaction during the entire supply chain, vendor, distributor, or government contract.
5. Building Credibility Good and timely GST filing establishes relative credibility to stakeholders, auditors, and authorities. There is less chance of disputes and scrutiny on businesses when their filings and remittances have been a solid part of transparency.
Practical Example Imagine a textile manufacturer sells monofilament yarn to a buyer worth ₹1,00,000. The GST rate overseeing the product is 18%.
1. Taxable Value = ₹1,00,000
2. GST @ 18% = ₹18,000
3. Total Invoice Value = ₹1,18,000
The manufacturer will issue an invoice for ₹1,18,000 summarizing the total amount, which includes the product and the GST. The invoice can show simply the selling price plus tax (the total invoice value), and therefore will simply state ₹1,18,000. For the buyers that are registered for GST (within India) – who paid the ₹18,000 GST; this amount can be claimed as Input Tax Credit (ITC), for their business tax is related to making taxable supplies, if the monofilament yarn is being used to make taxable supplies. This is the concept of the GST being neutral for business; at every point in the value chain, the tax burden ultimately passes on till it reaches the final consumer.
Now consider the same goods supplied interstate; the seller must charge IGST @ 18%. If sold intra-state, the GST is split between CGST (9%) and SGST (9%). This example demonstrates that GST corresponds to the invoice value, but it is also the basis of how compliance and the ITC flow down the chain via the supply chain.
Compliance Best Practices HSN Code for Monofilament HSN 5404 includes synthetic monofilaments, specifically those with at least 67 decitex and a cross-sectional dimension no larger than 1 millimetre.
GST Rate GST can be applied at a rate of 18% for monofilament yarn. It is, therefore, important for the manufacture and sale of yarn that the correct GST rate is used on invoices.
Application This rate reference applies to synthetic monofilament yarn only, including for textiles, fishing nets, industrial, packaging and agricultural purposes.
Compliance Using the specific HSN code correctly with the prescribed GST rate assists with the smooth processing of Input Tax Credits from GST, assists in risk compliance, and reduces risks of notice or penalties from the tax authority.
Corporate Classifying yarn correctly will ensure transparency in systematic taxes to the business supply chain, in addition to assisting businesses such as manufacturers, traders, and exporters with planned GST return filings for various synthetic yarn items across the manufacturing and commercial segments.
GST Rates & HSN Codes for Monofilament and Related Products HSN Code Product Description GST Rate 5404 Synthetic monofilament of 67 decitex or more and of which no cross-sectional dimension exceeds 1 mm 18% 5402 Synthetic filament yarn (other than sewing thread), not put up for retail sale, including synthetic monofilament < 67 decitex 18% 5403 Artificial filament yarn (other than sewing thread), not put up for retail sale, including artificial monofilament < 67 decitex 18% 5401 Sewing thread of man-made filaments, whether or not put up for retail sale 12%
Conclusion It is very important for the officers and businessmen involved with textiles, fishing, agricultural, and packaging industries to understand the HSN code 5404 and the 18% GST rate on monofilament yarn. Understanding the HSN code and complying with it limits mistakes and correctly classifies businesses. This classification and understanding are also aligned with procurers claiming Input Tax Credit (ITC) without issue. By being notified of GST procedures, and by using the correct HSN code (5404), the trader or manufacturer can avoid penalties, improve transparency and navigate operating under the GST system with ease.
Suggested Read: GST rates and HSN code 5408 for Woven Fabrics Of Artificial Filament Yarn
FAQs 1. What is the HSN code of monofilament under GST? HSN code for monofilament yards is 5404. It falls under Chapter 54 of the Customs Tariff Act.
2. What is the GST rate for monofilament yarns? GST rate for monofilament yarns is 18%.
3. Why is it important to use the correct HSN code? Using the correct code helps in compliance, can help get the correct ITC and helps avoid penalties.
4. Does the GST on monofilament apply to inter-state and intra-state supply? The GST rate of 18% applies to both inter-state and intra-state.
5. Can a business claim input tax credit (ITC) on any purchases of monofilament? Yes, a business that is registered under GST can claim ITC on any purchases of monofilament to supply a taxable supply.
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