GST Rate on Air Conditioners: Find HSN Code & GST Rate 2025

The Goods and Services Tax (GST) system in India directly shapes the pricing and taxation of air conditioners (ACs). Until September 2025, air conditioners were classified as luxury goods and taxed at the highest GST slab of 28%. However, as part of the Next-Gen GST reforms announced in the 56th GST Council Meeting (Diwali 2025), the GST rate on all air conditioners has been reduced to 18%.

This historic rate cut brings ACs in line with other large electronic appliances, making them significantly more affordable for households, commercial establishments, and industries. Below is a detailed explanation of the updated GST rate, HSN codes, pricing impact, and other tax implications you need to know.

Updated GST on Air Conditioners in India

Under the reformed GST regime, all categories of air conditioners—split, window, or commercial units—are now taxed at 18%. This represents a 10% reduction from the previous 28% slab, a move aimed at encouraging wider adoption of cooling technologies and reducing the financial burden on both households and businesses.

Key Highlights of the Rate Revision

• Old GST Rate: 28% (until 21 September 2025)
• New GST Rate: 18% (effective 22 September 2025 onwards)
• Applicable to: Residential, commercial, and industrial air conditioners, including Roof Mounted Package Unit (RMPU) ACs used in railways.

This uniform 18% rate eliminates the previous categorisation of air conditioners as “luxury goods” and is expected to significantly reduce retail prices.

Applicability of GST on Air Conditioners

GST applies to all types of air conditioners—including split ACs, window ACs, centralized cooling units, and commercial/industrial air conditioners. The 18% GST slab now applies uniformly to:

• Residential Air Conditioners: Split and window units for households.
• Commercial Air Conditioners: Units installed in offices, malls, and industrial premises.
• Specialized Systems: Centralized cooling solutions and railway RMPU systems.

This reform simplifies tax compliance and ensures a consistent tax burden across product categories.

HSN Code for Air Conditioners

The Harmonised System of Nomenclature (HSN) code for air conditioners remains unchanged. Accurate HSN coding is critical for GST filing, invoicing, and tax compliance.

Correct classification using these HSN codes is mandatory for businesses and dealers to avoid penalties and ensure proper GST credit.

Value of Supply for GST on Air Conditioners

The value of supply for air conditioners under GST is calculated based on the total transaction value, which includes:

• Sale price of the air conditioner, and
• Installation charges, if installation is part of the service.

Taxable Value = Sale Price + Installation Charges

For example, if an AC costs ₹60,000 and installation charges are ₹5,000, the taxable value is ₹65,000. Under the new GST rate, 18% GST will be charged on ₹65,000.

Price of Air Conditioners Before and After GST Reforms

Before GST (pre-July 2017), air conditioners were taxed under multiple indirect taxes, such as:

• Excise Duty: 12.5%
• Value Added Tax (VAT): 12.5% – 14.5%
• Service Tax on Installation: 15%

The combined tax burden reached approximately 27%. When GST was first implemented, ACs were placed in the 28% slab, slightly higher than the previous combined rate.

Impact of the 2025 GST Rate Cut

With the reduction to 18%, the final retail price of air conditioners has dropped significantly.

Savings: Approximately ₹7,000 on a single unit.

This direct price reduction makes air conditioners more affordable for consumers and businesses, particularly during peak summer and festive seasons.

Input Tax Credit (ITC) on Air Conditioners

Businesses can claim Input Tax Credit (ITC) on air conditioners used for business purposes, provided certain conditions are met:

• The AC must be used as a fixed asset for business operations—for example, in offices, factories, or commercial spaces.
• The AC must be classified as plant and machinery in the company’s books.
• The AC should not be used for personal purposes.

Legal Clarification on ITC

Under Section 17(5) of the CGST Act, ITC is generally not allowed on goods used to construct immovable property. However, air conditioners are not considered immovable property because they can be removed and reinstalled elsewhere.

Centralised air conditioning systems also qualify as plant and machinery, making ITC eligible when used for business activities.

GST on Imported Air Conditioners

When importing air conditioners into India, the following taxes and duties apply:

• Basic Customs Duty (BCD): 20% of the assessable value.
• Integrated GST (IGST): 18%, calculated on the assessable value plus BCD.
• Social Welfare Surcharge: 10% of the BCD.

The reduction of IGST from 28% to 18% considerably lowers the overall import cost, making high-end international AC brands more affordable.

Market Impact of the GST Rate Reduction

The 2025 GST reform is expected to:

• Boost demand for air conditioners in residential and commercial markets.
• Increase affordability for middle-class households and small businesses.
• Encourage manufacturers to expand production and introduce energy-efficient models.
• Support India’s climate-friendly cooling initiatives and strengthen the appliance market.

This move aligns with India’s vision of creating a sustainable and accessible cooling ecosystem.

Special Note on Railway RMPU ACs

Earlier, in the 54th GST Council meeting (2024), Roof Mounted Package Unit (RMPU) air conditioners used in Indian Railways were specifically taxed at 28%.

Under the 56th GST Council meeting reforms, these RMPU systems are now taxed at 18%, ensuring uniformity across all types of air conditioning systems.

Conclusion

The reduction of GST on air conditioners from 28% to 18% is a transformative reform in India’s indirect taxation system. By lowering the tax burden, the government has enhanced affordability for consumers, encouraged industry growth, and strengthened the domestic appliance market.

Whether you are a homeowner, business owner, or importer, this update provides direct financial benefits and simplifies tax compliance.

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