Friction Material GST Rates & HSN Code 6813: Expert Guide

Friction Material GST Rates and HSN Code 6813: An Expert Guide

Understanding the Goods and Services Tax (GST) implications for your business is crucial for compliance and financial planning. This article delves into the specifics of friction materials, focusing on their HSN (Harmonized System of Nomenclature) code 6813 and the applicable GST rates in India. We will explore the different types of friction materials, their classification, the GST rates applicable to each, relevant exemptions, and practical examples to help you navigate this complex area effectively.

What are Friction Materials?

Friction materials are engineered substances designed to generate controlled friction. These materials are essential components in braking systems and clutches, playing a vital role in converting kinetic energy into heat, thereby slowing down or stopping moving parts. They are widely used in the automotive industry, aerospace, railways, and various other sectors where controlled deceleration or secure engagement is required. Common types of friction materials include:

• Brake Pads: Used in disc brake systems to create friction against the rotor.
• Brake Shoes: Used in drum brake systems to press against the drum to slow or stop the vehicle.
• Clutch Facings: Used in clutch systems to engage or disengage the engine from the transmission.
• Linings: Used in various industrial applications for controlled friction.

HSN Code 6813: Friction Material Classification

The Harmonized System of Nomenclature (HSN) is a standardized system of names and numbers used worldwide to classify traded products. HSN code 6813 specifically covers "Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers) not mounted, for brakes, for clutches or the like, with a basis of asbestos, of other mineral substances or of cellulose, whether or not combined with textiles or other materials."

This code is crucial for determining the applicable GST rates on friction materials. Proper classification under HSN code 6813 is essential for accurate tax compliance.

GST Rates on Friction Materials (HSN 6813)

The GST rate applicable to friction materials under HSN code 6813 is primarily 18%. This rate applies to most types of friction materials, including brake pads, brake shoes, and clutch facings, as specified under Schedule III of Notification No. 1/2017-Central Tax (Rate) [Source: CBIC Website].

However, it's essential to refer to the latest GST notifications and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) to stay updated on any changes or specific exemptions. The GST Council, chaired by the Union Finance Minister Nirmala Sitharaman, regularly reviews and modifies GST rates based on economic conditions and industry feedback [Source: GST Council Press Releases].

Detailed Breakdown of GST Rates for Different Types of Friction Materials:

| Description | HSN Code | GST Rate | | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | :----------- | :----------- | | Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers) not mounted, for brakes, for clutches or the like, with a basis of asbestos | 6813 10 00 | 18% | | Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers) not mounted, for brakes, for clutches or the like, with a basis of other mineral substances or of cellulose | 6813 81 00 | 18% | | Other (Friction Material) | 6813 90 90 | 18% |

Note: This table is for illustrative purposes only. Always refer to the latest GST notifications for accurate and updated information.

GST Exemptions and Concessions

While the standard GST rate for friction materials under HSN code 6813 is 18%, certain exemptions or concessional rates may apply under specific circumstances. These exemptions are usually contingent on the end-use of the friction materials or the nature of the transaction. For example:

• Goods supplied to specific projects: Items supplied to projects that have been granted exemptions or concessional GST rates by the government may also benefit from reduced rates. This is often the case for infrastructure projects or projects of national importance.
• Supplies to SEZ units: Supplies of friction materials to units located in Special Economic Zones (SEZs) are treated as exports and may be exempt from GST, provided the necessary documentation is in place.

It's essential to thoroughly examine the relevant GST notifications and circulars to determine whether any exemptions or concessions apply to your specific transactions. You can consult with a tax professional or refer to the CBIC website for detailed guidance.

Impact of GST on Friction Material Industry

The implementation of GST has had a significant impact on the friction material industry in India. Prior to GST, the industry faced a complex tax structure with multiple taxes like excise duty, VAT, and CST. GST has streamlined the tax system, reducing the cascading effect of taxes and improving the ease of doing business.

However, the 18% GST rate has also led to an increase in the cost of friction materials for some businesses, particularly those that were previously subject to lower tax rates. On the other hand, the input tax credit mechanism under GST allows businesses to claim credit for the GST paid on their inputs, which can help offset the increased cost.

Practical Examples and Scenarios

Let's consider a few practical examples to illustrate the application of GST on friction materials:

Example 1: Manufacturer of Brake Pads

A company manufactures brake pads in Maharashtra and sells them to a dealer in Gujarat. The invoice value of the brake pads is INR 100,000. Since this is an interstate supply, IGST (Integrated Goods and Services Tax) will be applicable at 18%. The IGST amount will be INR 18,000, and the total invoice value will be INR 118,000.

Example 2: Supplier to an SEZ Unit

A supplier in Delhi sells friction material to a unit located in an SEZ in Noida. If the supplier complies with the necessary documentation requirements, the supply may be exempt from GST. In this case, the supplier would need to obtain a letter of undertaking (LUT) or a bond from the GST authorities.

Example 3: Importer of Clutch Facings

An importer in Chennai imports clutch facings from Germany. IGST will be levied on the imported goods in addition to the basic customs duty (BCD). The IGST rate will be 18%, calculated on the aggregate of the assessable value and the BCD.

Navigating GST Compliance for Friction Materials

To ensure compliance with GST regulations for friction materials, businesses should adhere to the following best practices:

1. Accurate Classification: Correctly classify the friction materials under the appropriate HSN code (6813). Misclassification can lead to incorrect GST rates and potential penalties.
2. Proper Invoicing: Issue GST-compliant invoices with all the required details, including the HSN code, GST rate, and GST amount. [Refer to Rule 46 of the CGST Rules, 2017].
3. Timely Filing of Returns: File GST returns (GSTR-1, GSTR-3B, etc.) on time to avoid late fees and penalties. [Refer to Sections 37 to 47 of the CGST Act, 2017].
4. Claiming Input Tax Credit (ITC): Claim ITC on the GST paid on inputs, including friction materials, to reduce your overall tax liability. Ensure that you have valid invoices and that the supplier has filed their GST returns. [Refer to Section 16 of the CGST Act, 2017].
5. Regular Updates: Stay updated on the latest GST notifications, circulars, and amendments issued by the CBIC. Subscribe to relevant industry newsletters and follow updates from reputable tax advisory firms.

Impact on Related Products and Industries

The GST rates applicable to friction materials also have indirect implications for related products and industries, such as automotive manufacturing, industrial machinery, and railway equipment. Changes in the cost of friction materials can affect the overall cost structure of these industries.

For instance, an increase in the GST rate on brake pads can lead to higher prices for vehicles, potentially impacting consumer demand. Similarly, higher GST rates on clutch facings can increase the cost of industrial machinery, affecting investment decisions in the manufacturing sector.

Carbon Electrodes GST Rates & HSN Code 8545 | Expert Guide - Internal link to another relevant article.

Key Considerations for Importers and Exporters

For businesses involved in the import and export of friction materials, it's essential to understand the specific GST implications for cross-border transactions.

• Imports: IGST is levied on imported friction materials in addition to the basic customs duty (BCD). The IGST rate is the same as the GST rate applicable to domestic supplies. Importers can claim ITC on the IGST paid on imports, provided they have the necessary documentation.
• Exports: Exports of friction materials are generally zero-rated under GST. This means that no GST is payable on exports, and exporters can claim a refund of the ITC paid on their inputs. Exporters need to obtain a letter of undertaking (LUT) or a bond from the GST authorities to export goods without paying GST.

The Future of GST on Friction Materials

The GST landscape is constantly evolving, and it's crucial to stay informed about any potential changes to the GST rates and regulations applicable to friction materials. The GST Council regularly reviews and modifies GST rates based on economic conditions and industry feedback.

In the future, we may see further rationalization of GST rates, which could lead to changes in the GST rate on friction materials. It's also possible that the government may introduce specific exemptions or concessions for certain types of friction materials to promote specific industries or policy objectives.

Conclusion

Navigating the complexities of GST on friction materials under HSN code 6813 requires a thorough understanding of the relevant regulations, notifications, and circulars. By accurately classifying your products, issuing proper invoices, filing timely returns, and claiming ITC effectively, you can ensure compliance and optimize your tax liability. Stay updated on the latest developments in GST to make informed decisions and maintain a competitive edge in the market. Consult with tax professionals and refer to official sources like the CBIC website for detailed guidance and clarification.