GST Rates HSN Code 8705 for Special Motor Vehicles

India's Goods and Services Tax (GST) structure has defined goods and services based on corresponding HSN (Harmonized System of Nomenclature) codes to provide for tax rate transparency as well as harmonized classification. Amongst them, one of the quite significant HSN codes is 8705 for "Special Purpose Motor Vehicles." The motor vehicles are not those deployed mainly for the carriage of persons or goods but special-purpose vehicles like mobile libraries, tankers for fighting fires, concrete mixers, and mobile clinics.

The GST categorization of such vehicles is relevant to manufacturers, service providers, government agencies, and enterprises reliant on such vehicles for specific use. The information in this article contains the data of HSN Code 8705, related GST rates, and the working implications of such categorization.

Understanding HSN Code 8705: Special Purpose Motor Vehicles

8705 HSN tariff item includes motor vehicles not fitted for use predominantly for the carrying of goods or people. However, they are fitted for use in certain activities, typically functional or technical purposes. The automobiles can be:

Fire-fighting trucks

Concreting mixing trucks

Medical mobile units

Mobile workshops

Mobile radiologic units

Van libraries

Telex vans

These special purpose vehicles are specifically manufactured and outfitted with necessary machinery and equipment to carry out their roles. This classification under HSN Code 8705 enables such types of vehicles to be exempted from the taxation of passenger and commercial vehicles.

The relevance of this classification has increased with the fact that government departments, construction companies, hospitals, and service providers employ such special purpose vehicles more and more for site operations and mobile services.

GST Chargeable on HSN Code 8705

Special purpose motor vehicles included under HSN code 8705, under the present regime of GST in India, attract 28% GST. They include fire brigade vehicles, crane lorries, mobile health clinics, and other vehicles constructed for particular purposes.

There may be a cess in certain cases if the structure of the vehicle is like luxury or transport vehicles, but otherwise not pure special purpose vehicles which are neither meant for carriage of passengers do not bring this cess. Why it is to be charged higher GST is that such vehicles would be classified as "luxury or non-essential" from the viewpoint of tax.

Companies and government agencies purchasing such vehicles have to plan ahead and are ready with the enormous tax expenditure at the time of purchase.

Benefits of Single Classification under HSN Code 8705

Single classification under HSN Code 8705 has several benefits:

Easy Compliance: The one classification under HSN Code 8705 eliminates confusion between producers, importers, and tax authorities. It facilitates efficient use of the rate of GST without ambiguity.

Better Input Tax Credit Planning: Companies purchasing these vehicles can claim actual input tax credit as per GST law. This makes returns accurate and raises the tax burden.

Better Specialized Services: By defining and categorizing these vehicles as specific, the government encourages utilization of mobile service solutions like mobile clinics and disaster relief trucks.

Simplified Imports: For imports from abroad, classification into one HSN code makes documentation and clearance easier.

Better Record Keeping: As the classification remains the same everywhere across the country, it is easier to maintain records of purchases, accounts, and audits in uniform.

Disadvantages and Practical Problems

Although it is good, there are not many issues associated with HSN 8705 taxation and classification.

Higher GST Rate: The 28% GST imposed on such vehicles hikes the cost of acquisition, especially for rendering life-saving services like mobile hospitals and fire services. It might deter non-profit agencies and local governments operating on tight budgets.

Uncertainty in Certain Instances: Partially passenger-carrying or multi-purpose vehicles (such as a bus for the transport of medical equipment) create ambiguity over classification. This may result in tax rate abuse or lawsuits.

No Lower Rates for Basic Services: Even though the majority of these vehicles are filled with useful social uses, there is no widespread availability of reduced rates of GST on the utility or welfare aspect to the public.

Limited Availability of Manufacturer: Due to low demand and high customization, there are seldom any manufacturers producing such customized vehicles, and as a result they are more expensive at base price without including taxation.

Market Trends

The demand of vehicles under HSN code 8705 has been gradually increasing in areas like health, building, disaster management, and infrastructure. Private and public institutions are investing in mobile solutions for traveling to remote locations and performing field-level operations more effectively.

Also, their application in urban planning processes - like road construction, waste collection, and traffic - has rendered them irreplaceable. Hence, in spite of the heavy burden of taxation, their application increases in India.

Classification under GST makes it easy for stakeholders to plan their auto buying strategy, accounting, and regulatory compliance conveniently. The majority of the customers these days go to auto experts prior to that and get classified accordingly by them to escape trouble of law.

Also cheek - Electric Motors and Generators HSN Code & GST Rate - 8501

Conclusion

Special Purpose Motor Vehicles play an important role in developing mobility-based services in industries such as construction, health care, emergency services, and education. Although taxability and compliance are easier with HSN Code 8705 classification, the comparatively higher GST rate can prove to be a cost factor. However, the value that these vehicles need to provide to society and industry cannot be ignored. With even more streamlined regulations and future GST rate changes for mere services, the use of such vehicles will become even higher.

FAQs

Is an ambulance covered under HSN Code 8705?

No, ambulances are usually covered under some other HSN code since they are mostly used for the transportation of human beings. The HSN 8705 is used for cars with distinctive machinery for distinctive non-transporting purposes.

Is input tax credit applicable on vehicles falling under HSN 8705?

Yes, if the special motor vehicle is used for business purposes, input tax credit can usually be claimed, if GST policy permits so.

Are food trucks mobile under HSN 8705?

Mobile food trucks can be brought under this head provided the vehicle is permanently equipped for use in cooking foods and is not for general use as a transport vehicle.

Are GST rates on special motor vehicles produced domestically and imported the same?

Yes, domestically manufactured as well as imported cars fall in the same GST slab of 28% under the HSN code 8705.

Are schools or libraries eligible to purchase library vans under this HSN code?

Yes, library vans fall under HSN 8705, and libraries historically utilize library vans to provide mobile library facilities in village or inaccessible locations.