Tar from Coal & Lignite: GST Rate & HSN Code Details

Trading commodities means you have to know a lot about them. If one is handling tar from coal or lignite, the GST rate and HSN code really matter for not messing up on taxes. In India, the GST system puts mineral products into certain categories that set the tax levels.

This article is about the tar from coal and lignite, including its GST and HSN rates, its manufacturing process, uses, and more.

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What is Tar from Coal & Lignite?

Coal tar is a by-product generated from coal gas and coke, and is a thick, dark, viscous liquid. It is used for several purposes, ranging from medical to industrial. This byproduct is mainly generated during steel manufacturing, as it is a byproduct of coal carbonisation during coke production. Therefore, countries with large coke ovens and heavy steel industries are major producers of coal tar. Countries like China, India, Japan, Russia and the United States are among the major producers. China is the major producer of coal tar in the world, contributing to about 70% of the production.

How is tar produced?

Coal tar comes from heating up coal without any air around it. The temperature gets really high, like 900 to 1200 degrees Celsius or so. This whole thing happens in coke ovens, mostly when they are making coke for steel production. This process is known as pyrolysis.

When the coal is heated that way, it sort of breaks apart into a few main things. There is the solid coke left over, which is fuel. Then coal gas, and also this thick black liquid that's the tar. The kind of coal matters a lot here, whether it's lignite or bituminous or anthracite, and even the exact heat level changes what one ends up with.

After collecting the tar, they process it more to pull out different parts, such as light oils, heavier ones, and other products. Those are used in roads, for keeping things waterproof, and making chemicals. The tar itself has tons of different substances mixed in, which are later separated.

Uses of Coal Tar

The tar coal is used for many purposes, ranging from industrial utility to medical uses. Here are a few uses of Coal Tar:

For medical purposes

Coal tar gets put on the skin for conditions like itching or when it's scaling and flaking, and dryness too. It works by slowing how fast those skin cells grow, which helps get rid of the dead ones on top. That part reduces the scaling and thickening, making things less dry overall. It also eases the itching that comes with all that irritation.

In the industry, Coal is used a lot to make other chemicals. It is used in the manufacturing of shampoos or creams, and ointments that treat dermatitis, psoriasis, and even dandruff.

Industrial Uses

Coal tar is used in the construction of roads. The coal tar produced during the extraction works is used as a binding agent during road construction. Also, coal tar pitch is used to make anodes for aluminium smelting.

It is also used as a waterproofer. Coal Tar is used on roofs and sealants to stop water from getting in. It is also used to make creosote, which keeps wood from rotting and bugs.

Chemical Manufacturing Uses

Tar coal is a key ingredient in making a bunch of products, like Naphthalene for moth repellents and chemicals, Phenol for resins and plastics, and Benzene and toluene for solvents and chemicals. It is also a key ingredient in making dyes, paints, and synthetic fibres.

Other uses

It is also used as a fuel in industries. Certain fractions of coal tar are used as industrial fuels due to their high carbon content.

HSN Code for Tar from Coal & Lignite

HSN stands for Harmonised System of Nomenclature, which is a unique code to identify different commodities. Under the GST classification, tar obtained from coal or lignite is broadly classified under HSN Code 2706. Here is the HSN code details:

27	Stands for chapter 27 (Mineral fuels, mineral oils, and products of their distillation)
2706	International subheading. Code for classification of Tar distilled from coal, lignite, or peat, and other mineral tars

The four-digit 2706 HSN code is further sub-categorised into 6 and 8-digit codes that are used for more specific evaluation. Here is the description for these codes:

HSN Code	Classification	Description
270600	India-specific detailed heading used for GST	Tar distilled from coal, lignite, or peat, and other mineral tars, whether or not dehydrated, partially distilled, or reconstituted.
27060010	Invoice-level or customs-level classification	Tar is distilled from coal, lignite, or peat, and other mineral tars. Used for standard coal/lignite tar used in industry
27060090	Invoice-level or customs-level classification	Includes less common tar products or reconstituted variants not specifically in 27060010

Need for identification of the correct HSN Code

The identification for correct HSN code according to the product is important. It can help you in:

Accurate GST return filing

Proper invoice generation

E-way bill compliance

Import and export documentation

Avoiding tax disputes or penalties

GST rate for Tar from Coal & Lignite

Under the Goods and Services Tax regime for India, tar distilled from coal, lignite, or peat falls under HSN Code 270600. Here is the GST description for the different HSN codes under tax regime:

HSN Code	GST Rate	Description
270600	5%	Tar distilled from coal, lignite, or peat, and other mineral tars, whether or not dehydrated, partially distilled, or reconstituted.
27060010	5%	Tar distilled from coal, lignite, or peat, and other mineral tars. Used for standard coal/lignite tar used in industry
27060090	5%	Includes less common tar products or reconstituted variants not specifically in 27060010

Also, under the GST system in India, the 5% GST on tar from coal and lignite can include CGST + SGST or IGST, depending on the type of transaction:

Intra-State Supply

In this type of supply, GST is split equally between the central and state governments:
CGST (Central GST): 2.5%
SGST (State GST): 2.5%
Total GST = 5%

Inter-State Supply

For such a transaction, GST is charged as IGST (Integrated GST): 5%

Importance of knowing proper GST rate classification

The identification of correct GST rates according to the tax regime for different codes is important. It can help you in:

Proper GST return filing

E-way bill generation during transportation

Proper invoicing and compliance with tax regulations

Ensure proper export rates. When it comes to sending coal tar overseas, it's treated as a tax-free item. The seller can get back the GST if they've already paid.

Helps to avoid misclassification, which may lead to penalties or disputes with tax authorities.