Wool Grease & Fatty Substances: GST Rate & HSN Code (1505) Wool grease, also referred to as lanolin, is classified as an industrial raw material that has arguably unique positioning compared to all other raw materials being utilized in different industries such as textiles, cosmetics and pharmaceuticals.
It is not always easy to identify how organic raw materials fit within the Harmonized System of Nomenclature (HSN). This article contains information on HSN code 1505, GST rates applicable to wool grease, and guidance on remaining compliant with India tax law.
What Is Wool, Grease, and Fatty Substances? Wool grease is a natural organic wax which is present in the sebaceous or oil-sweating glands of sheep. It can be obtained from sheep fleece through a process known as wool scouring. Natural wool grease is composed of a variety of different esters and cholesterol molecules, as well as waxy fat.
When wool grease is purified or refined it becomes lanolin. In addition to having excellent emollient properties, lanolin is an essential component or "hero ingredient," used in a wide variety of industries. Both "degras" (fatty substances produced when refining wool grease) and high-purity anhydrous lanolin fall within defined tax classifications under the GST rules.
Properly classifying these items is critical for your business to minimize tax exposure and avoid litigation.
READ MORE: GST Rates & HSN Code 6806 for Slag Wool and Rock Wool
HSN Code 1505 Explained HSN stands for Harmonized System of Nomenclature. It refers to an international system of nomenclature for products. As per the GST laws that are currently applicable in India, the classification of wool grease and derivatives thereof would be as follows:
“Chapter 15: Animal or vegetable fats and oils.”
HSN Code 1505 would be as follows:
"Wool grease and fatty substances derived therefrom (including lanolin)."
Breakdown of HSN 1505 Sub-categories It is necessary to mention the correct HSN code on the tax invoice by referring to the sub-classification as follows:
Wool Grease GST Rate in India The GST rate applicable on Wool Grease is at 12% . While some basic agricultural products may qualify for exemption or a 5% GST, Wool Grease, as well as Refined Lanolin, are classified as industrial raw materials. The 12% GST is applicable across the board, whether the Wool Grease is crude or whether it is Refined Lanolin used in expensive cosmetics.
Also check out: Wood HSN code 4409 and GST rates
Tax Breakdown Intra-State Sales: 6% CGST + 6% SGSTInter-State Sales: 12% IGSTWhen the 12% GST is applied, the GST incurred on the inputs, i.e., machinery, chemicals used in refining, etc., is generally recoverable by the manufacturers on the GST collected on the sale of the Wool Grease products.
Types of Products Covered Under HSN Code 1505 To understand how GST applies to wool grease, it is necessary to identify the products included in this category.
1. Crude Wool Grease Wool grease is an untwisted wax that is created when washing the wool of sheep in water. It is dark and has a distinct smell when raw. It has many industrial uses such as being part of heavy-duty lubricant products.
2. Lanolin (Refined Wool Grease) Wool grease is an untwisted wax that is created when washing the wool of sheep in water. It is dark and has a distinct smell when raw. It has many industrial uses such as being part of heavy-duty lubricant products.
3. Lanolin Alcohols and Acids From the process of hydrolyzing wool grease, you can obtain lanolin alcohols and acids, which are fatty materials, i.e., chemicals. The chemical industry can use either lanolin alcohols or lauric acid as emulsifying agents.
4. Degras Some types of degreasers are covered by the HSN code "wool grease." Other types of fatty materials obtained from treating wool grease will have the HSN code of "wool grease," or 1505.
Read More: GST rates and HSN code 2530 for Mineral Substances.
Industrial Uses of Wool Grease (Lanolin) Due to its many uses, lanolin is sold by a great deal of different businesses. The HSN Code of wool grease remains the same no matter how it is used i.e., heavy machines, delicate creams; it is known as wool grease under HSN Code 1505.
Skincare and Cosmetics Products: lanolin has been used in items such as lip balms and nipple creams for breastfeeding mothers as well as lotions as it is similar to the lipids found in human skin.Pharmaceuticals: Lanolin is used as a base for many medicated ointments and creams because it penetrates the skin with ease.Industrial Lubricants: Lanolin's natural wool grease has excellent rust-preventative characteristics and is frequently used as an anti-corrosive coating on metals surfaces.Leather Tanning: Lanolin is an important part of the "fat-liquoring process" which keeps leather flexible and supple.Conclusion Knowledge of the GST rate applicable on wool grease, as well as the intricacies of the HSN code 1505, is an essential prerequisite for any individual dealing in fatty substances. The standard GST applicable is 12% , but the key to success in this business is the correct classification of the products along with meticulous documentation.
Be it the import of crude grease meant for refining, or the export of high-grade lanolin meant for the international market, the key to success is keeping yourself updated with the notifications, regarding GST, as discussed above, in order to make your business not only profitable but also viable in the highly competitive market of chemicals as well as textiles.
FAQs 1. Is wool grease used in small industries exempt from GST? No, there is no end-use exemption for wool grease. The GST rate on wool grease is 12% whether the buyer is a large company or small local manufacturer.
2. Is the GST rate on wool grease different if it is a high-quality medical grade product? While lanolin can be purified extensively for medical use, it still falls within HSN 1505 at a GST rate of 12%. When sold as a specific medicament containing additional therapeutic ingredients in retail packaging, it could fall under Chapter 30.
3. Am I entitled to claim input tax credit on the purchase of wool grease? If you are GST registered and using the wool grease to further your business (i.e., as a raw material for manufacture), you can claim the entire 12% GST paid as an Input Tax Credit.
4. If I misclassify lanolin, what happens? When an organization incorrectly declares an HSN Code (i.e., Wrongly), this action is considered a misclassification and could result in penalties imposed by authorities.
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