GST Rate & HSN Code for Coffee, Tea, Mate, and Spices

• Coffee, tea, mate, and spices fall under Chapter 9 of the HSN classification.
• The 'Tea HSN code' varies based on its processing and form.
• GST on tea ranges from 0% to 5%, while coffee and spices attract 5% to 12% GST.
• Processed or packaged spices may attract a higher GST rate.
• Proper classification under the correct HSN code ensures compliance.

Chapter 9 of the Harmonized System of Nomenclature (HSN) is dedicated to the classification of coffee, tea, mate, and spices. These products hold significant importance in India, not only as essential household commodities but also as major contributors to the country’s agricultural economy and export sector.Let's learn more about the GST and HSN codes for coffee, tea, mate, and spices under Chapter 9.

Since these items range from raw agricultural products to processed and packaged goods, the GST rates vary depending on certain factors, such as:

• Whether the product is in its natural or processed form.
• If it has undergone any value addition, such as roasting, blending, or packaging.
• Whether it is sold loose, in bulk, or pre-packaged for retail consumption.

Reason for Product Classification Under Different Tax Slabs

The government has categorised these products into different tax slabs to ensure fair taxation and avoid unnecessary financial burdens on farmers and consumers.

• Basic raw agricultural products, such as unroasted coffee beans or unprocessed tea leaves are exempt from GST (0% tax slab).
• Other forms like packaged, flavoured, or instant varieties attract a higher GST rate of 5%, 12%, or even 18% depending on their classification.

Thus, businesses dealing in coffee, tea, mate, and spices must ensure accurate HSN classification to apply the correct GST rate and stay compliant with tax regulations. This classification is also crucial for exporters, traders, and manufacturers to claim input tax credits and avoid tax disputes.Understanding the HSN classification under Chapter 9 and keeping up with any GST rate revisions by the GST Council is essential for smooth trade operations and cost efficiency in the supply chain. Also Read: GST Impact on Indian Economy

The Goods and Services Tax (GST) on coffee, tea, mate, and spices depends on their processing, packaging, and intended use.While raw or unprocessed forms attract nil or lower GST, processed and value-added variants are subject to higher GST slabs. Accurate classification under the HSN code ensures businesses apply the correct tax rates and maintain compliance with GST regulations.Below is a detailed breakdown of GST rates for different forms of coffee, tea, mate, and spices under Chapter 9 of the HSN classification system.

1. GST on Coffee (HSN Code 0901)

Coffee is classified under HSN Code 0901, with varying GST rates depending on whether it is in raw, roasted, or instant form:

2. GST on Tea (HSN Code 0902)

The tea HSN code varies based on processing, packaging, and intended retail use. Different types of tea attract different GST rates:

The tea HSN code classification is crucial for correct GST calculation and compliance. Businesses dealing with tea must ensure they use the appropriate tea HSN code on invoices to prevent tax-related issues.

3. GST on Mate (HSN Code 0903)

Mate, a traditional South American herbal tea alternative, is also classified under Chapter 9:

4. GST on Spices (HSN Codes 0904 to 0910)

Spices are classified under HSN Codes 0904 to 0910. The GST rate on spices varies, depending on whether they are whole, powdered, or mixed:

Key Taxation Rule: Whole or ground single spices typically attract 5% GST, while blended or processed spice mixes fall under the 12% GST category due to value addition and packaging.

The tea HSN code plays a crucial role in determining the correct GST rate for different types of tea. This ensures businesses comply with tax regulations and avoid unnecessary financial liabilities.

Importance of Correct Tea HSN Code Classification

HSN is a globally accepted system that categorises goods for taxation and trade purposes. Since different types of tea—bulk, flavoured, or instant tea—are processed differently, they attract different GST rates based on their classification. It involves:

• Ensuring accurate GST calculation and invoicing.
• Preventing penalties, fines, or legal issues due to misclassification.
• Helping businesses claim the right Input Tax Credit (ITC) .
• Reducing chances of unnecessary tax over-payment or disputes.
• Simplifying customs clearance for exporters and importers.

The GST rate on tea varies depending on the type of tea and its processing level. Below is a breakdown of HSN codes and their applicable GST rates:

Misclassification of the tea HSN code can lead to serious financial and compliance issues, including:

• Over-payment or Underpayment of GST: Using an incorrect HSN code may result in higher tax liabilities or non-compliance with tax rules.
• Legal Penalties and Audits: If the GST authorities find discrepancies in HSN classification, businesses may face fines, tax reassessments, or audits.
• Delayed ITC Claims: Incorrect classification can lead to Input Tax Credit (ITC) disallowance, affecting cash flow and profitability.
• Trade Disruptions: Exporters may face customs clearance delays or rejection of export claims if the wrong tea HSN code is used.

Example Scenarios Scenario 1: Selling Loose Darjeeling Tea

• If you sell loose Darjeeling tea, it should be classified under HSN Code 0902 with a 5% GST rate.
• Incorrectly classifying it under HSN Code 2101 (instant tea) may lead to an over-payment of GST (18%), causing unnecessary financial burdens.

Scenario 2: Selling Flavoured or Instant Tea

• If you deal in flavoured tea or instant tea, it must be categorized under HSN Code 2101, attracting 18% GST.
• Mis-classifying it under HSN Code 0902 (bulk tea) may result in underpayment of GST (5%), leading to tax penalties later.

Best Practices to Ensure Correct Tea HSN Code Usage

To avoid errors in tea classification, businesses should follow these best practices:

• Refer to GST Notifications & Updates: Regularly check government-issued GST circulars for changes in HSN classification.
• Consult with Tax Experts: Seek guidance from GST consultants or tax professionals to ensure proper classification.
• Use HSN Code in Invoices Correctly: Clearly mention the correct tea HSN code on tax invoices to avoid disputes with tax authorities.
• Differentiate Between Loose and Processed Tea: Ensure you classify flavoured, instant, or ready-to-drink tea separately from loose tea to apply the correct tax rate.
• Educate Supply Chain Partners: If you are a wholesaler or retailer, educate suppliers and distributors about the importance of proper HSN classification to maintain consistency.

Also Read: Understanding the Impact of GST on Health Insurance: Changes in Rates and Policies

The GST Council periodically revises tax rates to streamline taxation and reduce ambiguities in product classification. These revisions ensure that businesses comply with GST regulations while minimising tax disputes and ensuring fair pricing.

Key Changes in GST Rates

The latest updates regarding GST on coffee, tea, mate, and spices include the following:

• Packaged and flavoured tea continues to attract 18% GST under HSN Code 2101, ensuring consistency in taxation for processed tea products.
• Unprocessed tea leaves and green tea (bulk form) remain tax-free (Nil GST) under HSN Code 0902, benefiting tea growers and bulk distributors.
• Processed or packaged spices now attract 12% GST instead of 5% under HSN Codes 0904 to 0910, increasing tax liability for spice manufacturers and retailers.

Since GST classifications impact pricing, tax credits, and supply chain costs, businesses must stay updated with official GST notifications to prevent miscalculations and ensure compliance.

Regular GST revisions mean businesses must monitor changes to ensure they:

• Charge the correct GST rate on invoices to avoid penalties.
• Claim the right Input Tax Credit (ITC) and optimize tax savings.
• Maintain accurate tax records to prevent audits and compliance issues.
• Adjust pricing strategies to reflect changes in tax rates.

Tea traders, coffee retailers, and spice wholesalers should actively track government circulars and GST notifications to ensure they remain compliant with evolving tax laws.

For businesses dealing in coffee, tea, mate, and spices, correctly classifying products under the right HSN code is essential. Misclassification can lead to unnecessary tax liabilities, incorrect invoicing, and potential penalties.Whether you are a tea trader, coffee distributor, or spice wholesaler, accurate classification will help you optimise tax benefits, avoid legal complications, and enhance business efficiency. Also Read: Understanding the Impact of GST on Health Insurance: Changes in Rates and Policies