Chapter 10 - GST Rates and HSN Code for Corn: A Complete Guide

• Unprocessed maize (HSN 1005) is GST-exempt (0%), keeping it affordable for farmers and traders.
• Tax rates depend on the level of processing—raw corn is exempt, while processed and ready-to-eat products attract higher GST.
• Businesses must register for GST, file returns, issue proper invoices, and generate e-way bills for shipments above ₹50,000.
• Businesses can claim Input Tax Credit (ITC) on maize used for resale or manufacturing but not on personal purchases.
• While raw maize remains tax-free, processed maize-based foods are costlier due to the 18% GST slab.

Corn, also known as maize, is a vital agricultural commodity with diverse applications in food production, animal feed, and various industrial processes. As a staple crop, it plays a crucial role in India's economy, supporting farmers, traders, and food manufacturers alike.Under India's Goods and Services Tax (GST) system, corn and its derivative products are classified under different tax slabs based on their level of processing, intended use, and market category. For businesses involved in the cultivation, trade, or processing of maize, understanding the correct GST rates and Harmonized System of Nomenclature (HSN) codes is essential for compliance, proper invoicing, and tax optimisation.
In this guide, we’ll explore the GST classifications for different forms of corn, applicable tax rates, and what they mean for businesses and consumers.

Corn and its processed derivatives fall under Chapter 10 and Chapter 11 of the HSN classification system, with GST rates varying according to the product's form and processing level.Below is a detailed breakdown of the applicable GST rates for different maize products:

The GST rates for maize products are determined by their level of processing and intended use. Here’s why different forms of corn attract varying tax rates:

Basic Agricultural Produce (0% GST)

Raw maize (HSN Code: 1005) is a staple crop and an essential food commodity, which is why it is exempt from GST when sold in its natural form. This tax exemption ensures that farmers do not bear an additional tax burden and that food security is maintained.

Milled or Minimally Processed Corn (5% GST)

Products like maize flour and cornmeal, which undergo primary processing but remain close to their natural form, are classified under low-tax food essentials. They attract a 5% GST rate, which ensures affordability while generating some tax revenue.

Highly Processed Corn-based Products (18% GST)

Processed food items like cornflakes, ready-to-eat snacks, and puffed maize products fall into the luxury or non-essential category under GST rules, attracting a higher 18% tax. Since these items require extensive processing, branding, and packaging, they are taxed at a rate similar to other packaged food products.This tiered tax structure ensures that staple agricultural products remain tax-free or attract lower GST, while processed and value-added food products contribute to the tax system.

GST Compliance for Corn Traders and Manufacturers

Businesses engaged in the cultivation, trading, processing, or retailing of maize must adhere to GST regulations to ensure legal compliance and avoid penalties. Proper GST compliance facilitates smooth business operations, prevents tax evasion, and enables businesses to benefit from Input Tax Credit (ITC) where applicable.Below is a detailed breakdown of key GST compliance requirements for maize traders and manufacturers:

GST registration is mandatory for businesses involved in maize trading and processing under the following conditions:

• Annual turnover exceeds ₹40 lakh (for most states).
• Annual turnover exceeds ₹20 lakh (for special category states such as the North-Eastern states, Himachal Pradesh, and Uttarakhand).
• Businesses engaged in inter-state trade of maize (even if turnover is below the threshold).
• E-commerce sellers dealing in maize products (must register for GST irrespective of turnover).
• Businesses are liable to pay tax under the reverse charge mechanism (RCM), such as certain maize procurement transactions.

To register for GST, businesses must:

• Step 1 : Visit the GST portal ( www.gst.gov.in ) and create an account.
• Step 2 : Fill out Form GST REG-01 with business details.
• Step 3 : Submit required documents, including:

• Step 4 : Receive GSTIN (GST Identification Number) after successful verification.

Failure to register when required can lead to penalties, including a fine of 10% of tax due or ₹10,000, whichever is higher.

Businesses dealing in maize must issue GST-compliant tax invoices for every taxable transaction. Let's look at the key elements of a GST-compliant invoice. A valid invoice must include:

• Invoice number and date
• Seller and buyer GSTIN (if applicable)
• HSN Code of the maize product
• Description of goods (e.g., maize flour, processed corn snacks, etc.)
• Quantity and unit price
• Applicable GST rate (0%, 5%, or 18%)
• Total value, tax amount (CGST + SGST or IGST), and final payable amount

Example of a GST-Compliant Invoice for Maize Flour Sale

Note:

• Small businesses with turnover below ₹1.5 crore may issue bills of supply instead of tax invoices.
• Invoices must be digitally stored for at least six years for audits.

Businesses engaged in maize trading and processing must file periodic GST returns to report sales, purchases, and tax liability: Types of GST Returns Required

• ₹50 per day (₹25 CGST + ₹25 SGST) for normal taxpayers
• ₹20 per day (₹10 CGST + ₹10 SGST) for nil returns
• Interest at 18% per annum on unpaid tax

Tip : Use GST return filing software or hire a GST consultant to ensure compliance and avoid penalties. E-Way Bills for Transporting Corn An E-Way Bill is mandatory for the transportation of maize and maize-based products if the consignment value exceeds ₹50,000 for inter-state movement.

Businesses must generate an E-Way Bill on the GST E-Way Bill portal ( ewaybillgst.gov.in ) before transporting maize.

Information Required to Generate an E-Way Bill:

• Invoice details (invoice number, date, seller & buyer GSTIN)
• Transporter details (vehicle number, transport ID)
• HSN Code of Goods
• Value of goods

Validity of an E-Way Bill

Exceptions: When is an E-Way Bill NOT Required?

• When transporting maize within the same state for distances below 50 km.
• For the transportation of raw maize (HSN 1005) directly from farms, as it is GST-exempt.

Penalty for Non-Compliance:

• A fine of ₹10,000 or the tax amount (whichever is higher).
• Vehicle seizure until the fine is paid.

The Input Tax Credit (ITC) mechanism allows businesses to offset the GST paid on purchases against the GST collected on sales. This prevents the cascading effect of taxation (tax-on-tax) and helps reduce overall tax liability.For businesses dealing with corn and corn-based products, ITC eligibility depends on the nature of the purchase and its intended use in business operations.

Eligibility Criteria for ITC on Corn and Corn-Based Products

A business can claim ITC on corn purchases if:

• The corn is used for taxable supplies

• A valid tax invoice is available

• The business is GST-registered

• GST returns are correctly filed

• The supplier has reported the transaction

While the Input Tax Credit (ITC) mechanism helps businesses offset the GST paid on purchases, there are specific situations where ITC cannot be claimed on corn and its derivatives.Understanding these restrictions is crucial to ensure compliance with GST regulations and avoid unnecessary financial losses.

• Personal Use or Non-Business Consumption

• Exempt or Non-Taxable Supplies

• Businesses under the GST Composition Scheme

• Incomplete or Incorrect Documentation

• Ensure GST registration.
• Verify supplier compliance – purchase from GST-registered suppliers.
• Maintain proper documentation – keep invoices and tax records.
• Declare ITC in GSTR-3B.
• Match invoices with GSTR-2B for accuracy.

Impact of GST on Corn Prices The Goods and Services Tax (GST) framework in India affects corn prices differently depending on the level of processing and the product category. While raw maize is exempt from GST, processed corn-based products attract varying tax rates, influencing both production costs and retail prices. Let's learn more:

1. No GST on Raw Maize

• Unprocessed maize (HSN Code 1005) is fully exempt from GST, ensuring that farmers and bulk buyers do not face additional tax costs.
• Since no GST is levied, the cost of raw maize remains stable, benefiting primary producers and large-scale agricultural traders.

2. Lower GST on Milled Corn Products

• Maize flour (HSN Code 11022000) and corn groats (HSN Code 11031300) attract a 5% GST.
• This moderate tax rate keeps basic maize-based food products relatively affordable for consumers.
• Since businesses can claim Input Tax Credit (ITC) on the GST paid for maize flour and groats, the tax burden is reduced.

3. Higher GST on Processed Corn-Based Foods

• Processed corn products, such as cornflakes (HSN Code 11042300) and puffed maize snacks (HSN Code 19043000), attract an 18% GST.
• The higher tax rate is due to additional processing, value addition, and branding, categorising these products under processed and packaged foods.
• As a result, end consumers bear the higher cost, making processed corn products more expensive compared to raw or minimally processed maize.

4. ITC Benefits for Businesses

• Manufacturers and retailers dealing in taxable maize products can claim Input Tax Credit (ITC) on their purchases, helping to offset some of the tax burden.
• However, this benefit does not extend to consumers, meaning the higher GST on processed corn products is reflected in retail prices.

Understanding the correct GST rates and HSN codes for corn is essential for businesses operating in agriculture, food processing, and retail. The zero tax on raw maize benefits farmers and large-scale buyers, but processed corn products are taxed based on their level of refinement, impacting their market price.For businesses, ensuring proper GST compliance, including registration, accurate invoicing, return filing, and ITC claims is crucial for cost optimisation and legal compliance.By classifying corn products correctly and taking advantage of ITC benefits, businesses can mitigate tax costs and maintain profitability in a GST-regulated environment. For further assistance with tax planning, connect with Aditya Birla Capital now!