GST on motion-lit toys may change soon
The GST on motion-lit toys is under review. The Commerce Ministry has asked the GST Council to rationalize the current tax rate of 18%, as it’s higher than the 12% charged on non-electronic toys. If approved, this change could directly benefit Indian toy manufacturers and importers who deal in toys with built-in electronics like lights or movement.
Let’s break down what this means for your business and how you should prepare.
Current GST rates on toys: A quick overview
Under HSN Chapter 95, GST rates on toys depend on their construction and features:
| Type of Toy | HSN Code | GST Rate |
|---|---|---|
| Non-electronic toys (plastic, wood, etc.) | 9503 | 12% |
| Electronic toys (with motion/light) | 9503 | 18% |
The current issue? Even simple battery-operated toys with blinking lights fall under the 18% slab, creating cost burdens for MSMEs and pricing disadvantages for Indian-made toys compared to imports from countries like China.
What triggered the push for GST rationalization?
As per official sources from the Commerce Ministry, the following reasons have been cited in its representation to the GST Council:
- Inverted duty structure: Raw materials attract 18% GST, while non-electronic toys are taxed at 12%, leading to input tax credit (ITC) accumulation and refund issues.
- Make in India push: Higher GST on motion-lit toys discourages local assembly and manufacturing of low-tech battery-operated products.
- Unfair competition: Cheaper imports from ASEAN and China with undervalued declarations often bypass the 18% GST slab.
This move aligns with the Ministry’s broader efforts to promote domestic toy manufacturing under the National Action Plan for Toys (NAPT).
What change is being considered?
The proposal seeks bringing down GST on motion-lit toys from 18% to 12%, especially for toys where:
- Motion is basic (like push-and-go cars)
- Lighting is limited to small battery-powered components
- No advanced sensors or microcontrollers are involved
This rationalization is expected to be discussed in an upcoming GST Council meeting. Any rate change would require a notification under Section 9(1) of the CGST Act, 2017 with corresponding amendments to Notification No. 1/2017-Central Tax (Rate).
Impact on toy businesses in India
If GST on motion-lit toys is reduced:
- Retail prices may drop → Higher sales volumes in Tier 2/3 markets
- Lower working capital pressure → Reduced tax outflow at purchase
- Easier compliance → Fewer classification disputes at customs
However, until a formal GST notification is issued, current rates remain applicable. Businesses should avoid premature rate assumptions during billing.
Expert Tip: Watch out for classification risks
CA Pranav Vyas, Indirect Tax Advisor at Efiletax, says:
“We often see customs officers reclassify toys based on minor electronic functions, leading to 18% GST and penalties. Until rates change, importers must ensure that the declared HSN and toy features are accurately documented in the Bill of Entry and e-invoices.”
Action steps for toy traders and importers
- Review your product catalogue: Separate motion-lit toys from purely mechanical ones
- Check customs declarations: Ensure correct HSN and valuation
- Avoid misclassification: Stick to current GST rates until official change
- Update ERP systems: Be ready to reconfigure tax settings if the Council approves the new rate
Will the GST Council approve the change?
Historically, the Council has rationalized rates for mass-consumption goods and MSME-sensitive sectors. With India’s toy exports growing by 239% in the last six years (per Ministry data), aligning GST with global tax norms is now seen as a priority.
That said, final decision rests with the GST Council, which balances revenue needs and policy goals. Watch for updates after the next Council meeting.
FAQs on GST for motion-lit toys
Q1. Is GST on battery-operated toys always 18%?
Yes, currently. If the toy has any electronic component like a motor or light, it falls under the 18% slab.
Q2. Can motion-lit toys be classified under 12%?
Only if they don’t have electronic or battery components. Else, classification under 18% remains valid.
Q3. Will the proposed change be retrospective?
Unlikely. GST rate changes apply prospectively from the notified date.
Q4. How to check the correct HSN code?
Refer to CBIC’s HSN Lookup tool or consult the Tariff Notification No. 1/2017-Central Tax (Rate).
Summary
The Commerce Ministry has proposed a GST cut on motion-lit toys from 18% to 12%. The move aims to support domestic manufacturing and ease compliance. Final decision rests with the GST Council. Until notified, current 18% GST remains applicable for battery-operated toys.
Final Thoughts
GST rationalization for motion-lit toys is a step in the right direction for Make in India and the growing toy sector. Efiletax will continue to monitor updates and notify businesses of any official rate changes.
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