Is your supplier charging you correct taxes and duties for your digital displays? Why should you care?

The taxes and duties that you pay depend on the HSN code of the product. First and foremost, let's understand what an HSN code is? It is a classification system for commodities used worldwide to bring a standardization for customs and other duties. An HSN code comprises of a category code, that decides which product/commodity falls under which category and the respective duties applicable.

Many times, importers misclassify products conducting a fraud to save certain taxes and duties. What most customers don’t know is that misclassification of the HSN code is a punishable offense and can bear a great impact on them.

What is the tax amount that you should be paying for displays 18% or 28%? All the digital displays like monitors, panels, LED videowall fall under the category 8528, as a result, the tax implications for these items is 28% tax. Many suppliers misclassify the displays and import them into the category 8531 which is ideally the category for indicators, sirens etc. The tax for the items under the category code 8531 is 18%, and the suppliers end up paying lesser tax.

Let's understand this through an example:

By misclassifying the displays and importing them under the category code 8531, supplier A carries out a theft of Rs. 7500.

Why should the end customer care about this?

If this theft is caught by the Department of Revenue, the consequences of this misclassification is not just limited to the supplier but trickle down to the buyer as well. Below are the implications that the supplier will bear: 

1) The supplier is liable to pay 100% penalty

2) The difference in the amount of tax & duty

3) Interest on the amount till date

The suppliers who indulge in such practices may have done this for multiple clients that result in a hefty penalty which he may not be able to pay. Failure on the supplier’s end makes the client liable to pay the penalty, tax difference and the interest until then the displays would be confiscated.

BIS Certification Requirement

BIS certification is mandatory for all the manufacturers in India, it assures the quality check of the product. The mandate for the BIS certification is decided based on the HSN code. LED displays which are listed under 8528 require a quality check. BIS certifications assure that quality check and when a buyer chooses a supplier who misclassifies the products he is compromising on the quality of LED displays. 

While selecting your supplier for an LED videowall, go for a supplier who correctly classifies the products and charges correct tax amount. You can ensure this by checking the HSN code he is referring to. Since the HSN code is directly mentioned on the invoice, end customer can easily recheck this by visiting government’s website http://www.cybex.in and entering the product name. If your supplier is quoting a substantially lower price, please check that there is no tax theft that will make a dent in your pocket in the long run.