Animal and vegetable fats GST rate and HSN 1516

Ever wondered why some oils are solid at room temperature, just like Amul ghee used by almost all Indian households, while oil remains liquid? The answer lies in a process called hydrogenation. It is simply defined as a method of adding hydrogen to vegetable or animal fat to alter its texture and increase its storage life.

In the taxation and trade world, animal and vegetable fat falls into a particular GST regime classified under HSN 1516 animal and vegetable fats. Be it a healthy vegetable fat used for frying foods or animal fat used by the cosmetics industry, every business owner needs to know the tax rates applicable to this class of goods.

As we move towards 2026, the rules governing this class of goods have been simplified significantly. This article will walk you through GST applicable to animal and vegetable fat, GSN 1516, and the latest rates that are making this class of goods more affordable for all.

What is HSN 1516?

HSN 1516 is a specific code used for fats and oils that have been so chemically modified. This is not just the raw oil pressed from a seed; it is oil that has gone through a transformation to change its properties. The products that are included under HSN 1516:

‍Hydrogenated vegetable fats: These are commonly known as “Vanaspati ghee.”

Inter-esterified oils: These are oils, inter-esterified to have a smooth texture, used in baking products.

Re-esterified fats: These are fats, chemically altered, and are used for processing and industrial purposes.

Animal fats: Chemically altered fats, derived from fish, or say, marine mammals, or even other animals.

‍Read more: HSN 1510 of Other oils.

What is the uniform 5% shift in GST rates 2026?

Following the landmark “GST 2.0” reforms introduced in late 2025, the tax rates for this category have been streamlined to help consumers and businesses. Previously, the rates for this chapter were very confusing, with some animal fats taxed as high as 12% or 18% while edible vegetable oils were at only 5%.

Effective from September 22, 2025, the GST Council moved almost all products in Chapter 15 to a uniform 5% GST rate. This ensures no distinctions. Whether the fat comes from a plant or vegetable, an animal, or even a microbe, the tax is now the same. This move also was designed to eliminate “classification” disputes where businesses struggled to prove whether a fat was for edible or industrial use. Now, a single 5% merit rate applies for all, and hence, no disputes.

Difference between the old rates vs. new uniform 5% rate

The difference between the old GST rates and the new GST rates are given below. It is becoming increasingly clear that the majority of these products have gone through significant reduction.

Name of the Product	HSN Code	Previous GST Rate	New 2026 Rate
Vegetable hydrogenated Fats	1516	5%	5%
Animal hydrogenated fats	1516	12%	5%
Microbial fats & Oils	1516	12%	5%
Margarine & Edible Mixtures	1517	12%	5%
Chemically Modified Oils	1518	12%	5%

For a detailed list, read this article by ClearTax.

Tips for businesses

Managing a business that deals with various oils and fats means tracking multiple HSN codes and ensuring you apply the correct tax every time can be a little convoluted, we know. If you accidentally charge the old 12% rate instead of the new 5%, you might lose to customers who are more tax-savvy competitors. This is where a billing app like Swipe can be useful.

By dealing with us and using Swipe, you do not even have to deal with a manual list of the GST rates on animal and vegetable fats. The app automatically updates to the very latest tax reforms. When you select an item under HSN 1516, Swipe applies the 5% rate instantly and updates your digital ledger. In 2026, this can be your greatest tool and a great advantage.

Conclusion

The shift to a uniform 5% rate for HSN 1516 is a massive win for transparency in India's taxing system. By removing the difference between animal and vegetable origins, the government has made it very easy, even easier, if you must, for businesses to file returns without fearing any mistake. This works even if you are a wholesaler of vegetable ghee or a manufacturer using modified fats for cosmetics, the lower 5% rate helps you keep your prices competitive. It is then very important to stay updated and ensure your HSN codes are accurate in your billing software, or use smart tools like Swipe to do that for you!

FAQs

Does the 5% rate apply to industrial animal fats too?

Yes. following the GST 2.0 reforms. The distinction between edible and industrial use for chapter 15 oil has been removed. Now the GST rate is 5%.

What is the difference between HSN 1516 and HSN 1517?

HSN 1516 is for fats that are chemically modified but not further prepared. HSN 1517 is for mixtures. For example, margarine, which contains water or salt to make it ready for use. Both were 5% in 2026, though!

Can i claim input tax credit (ITC) on my oil purchase?

Absolutely, if you are a registered business buying fats under GSN 1516 for resale or as a raw material for your own products, you can claim the full 5% GST paid as ITC. Learn more about Input Tax Credit.

Is the GST on raw sunflower or mustard oil also 5%?

Yes, raw vegetable oils also carry a 5% GST rate. The goal of the 2025 update was to bring the entire “fats and oils” cha[fer under one single 5% slab.

What happens if i use the wrong HSN code?

Using the wrong HSN code can lead to tax notices and penalties under Section 125 of the CGST act, according to CAclubindia. Even if the tax rate is the same, the government requires accurate classification for trade statistics. Using a tool like Swipe really helps in these scenarios.

Curious? Try Swipe for FREE!

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