GST on AC: Latest GST Rates and HSN Codes on Air Conditioners

Air conditioners (ACs) have witnessed a significant change in their GST rates recently. Previously taxed at 28%, the GST rate on various types of ACs has been reduced to 18%, effective from September 22, 2025. This move under GST 2.0 is expected to make cooling appliances more affordable amid rising demand across India.

• Old GST rate: 28% on most AC types
• New GST rate: 18% on most AC types (effective Sep 22, 2025)

Explore more on the GST rate and understand overall GST. Also, check your business loan eligibility to support your purchase plans.

From September 22, 2025, the GST rate on all types of air conditioners—split, window, and portable—has been reduced to 18% from the earlier 28%. To work out the GST, add the base price of the AC and installation charges to get the taxable value, then calculate 18% of that total.

Formula:

• Total taxable value = Base price of AC + Installation charges
• GST amount = Total taxable value × 18%
• Total cost = Total taxable value + GST amount

Example:

If an AC costs Rs. 40,000 and installation is Rs. 1,000:

1. Taxable value: Rs. 40,000 + Rs. 1,000 = Rs. 41,000
2. GST amount: Rs. 41,000 × 0.18 = Rs. 7,380
3. Total price: Rs. 41,000 + Rs. 7,380 = Rs. 48,380

Use a GST calculator to quickly estimate your GST on air conditioners. Check the old and new prices of ACs after this GST reform.

GST applies to most electronic goods, including air conditioners. Following the 56th Council’s rate rationalisation, India now mainly uses two GST slabs: 5% for essential items and 18% as the standard rate, with a separate 40% “demerit” rate for luxury or sin goods. From 22 September 2025, air conditioners will attract 18% GST, down from 28%. With rising temperatures and changing consumer needs, ACs are no longer considered a luxury and are now taxed at the standard rate alongside other household appliances.

Input Tax Credit (ITC) availability and reversal for air conditioners

Under GST, any registered person can claim Input Tax Credit (ITC) on goods and services purchased for business use. However, Section 17(5) limits ITC on goods and services used for constructing immovable property, except for plant and machinery.

According to Section 3(26) of the General Clauses Act, 1897, immovable property includes “things attached to the earth or permanently fixed to walls and buildings.” Although air conditioners are attached to walls, they can be relocated. Therefore, they are not treated as immovable property.

A centralised AC system is classified as plant and machinery rather than immovable property, so the restrictions under Section 17(5) do not apply. It is important to record the cost of the AC separately as plant and machinery, not as part of the building. If the AC is installed in an office or factory for business purposes, ITC can be claimed.

If the supply includes both taxable and exempt goods, ITC should be reversed in accordance with Rules 42 and 43 of the CGST Rules.

At present, there are no GST exemptions for air conditioners. Both split ACs and window units now attract the standard GST rate of 18% under the revised structure effective from September 2025, down from the previous 28% rate. The government has not introduced any relief or concessional rates for ACs under GST so far.

Conclusion

The reduction in GST rates on air conditioners has made these essential appliances more affordable for both consumers and businesses. Knowing the applicable GST rates, HSN codes, and ITC implications can help ensure compliance and optimise costs. If you are planning to upgrade your business infrastructure, consider exploring business loans to fund your purchase. You can use a business loan EMI calculator to estimate repayments, check the latest business loan interest rate, and review your business loan eligibility before applying.