—Guide
GST Classification and Advance Rulings: Getting Your Rate Right
How GST classification decides your rate, common sources of disputes, composite and mixed supplies, and when to seek an advance ruling.
The GST rate on a product or service depends on how it's classified. A small difference in how something is described can move it into a different rate — and years of charging the wrong rate can add up to a large liability. This guide explains classification and how to get certainty.
How Classification Works
Goods are classified under HSN codes, and services under SAC codes. The rate notifications then set the rate for each code. Classification follows the description of the goods or services, the rules of interpretation, and what the product actually is and how it's used.
Where Disputes Arise
- Products that could fit more than one heading, like food products, cosmetics versus medicines, or machinery parts.
- Services bundled with goods.
- New products and business models not clearly covered.
- Products whose rate depends on packaging, branding or usage.
Composite and Mixed Supplies
- A composite supply is two or more supplies naturally bundled, with one principal supply. It's taxed at the rate of the principal supply.
- A mixed supply is two or more supplies sold together for a single price but not naturally bundled. It's taxed at the highest rate among them.
Advance Rulings
A business can apply to its state's Authority for Advance Ruling on questions including:
- Classification of goods or services.
- Applicability of a notification affecting the rate.
- Whether a particular activity is a supply.
- Admissibility of input tax credit.
- Whether registration is required.
The ruling binds the applicant and the tax officers for that applicant, for the transaction, unless the law or facts change. Appeals lie to the Appellate Authority for Advance Ruling.
When to Seek One
An advance ruling makes sense for high-value, genuinely uncertain issues, especially before launching a new product. For most questions, a well-reasoned written opinion is enough.
Getting Help
Think Filing advises on classification, prepares opinions, and applies for advance rulings where certainty is needed.