Classification disputes under GST: the principles the courts apply
Classification is not an opinion about what a product is. It is an exercise in sequence, and the sequence is the argument.
GST rates are notified with reference to the headings of the Customs Tariff, and the rate notifications adopt the Tariff, its Section and Chapter Notes and the General Rules of Interpretation. Classification therefore proceeds in sequence: the terms of the heading, then the Section and Chapter Notes, then the General Rules including the specific over general rule, the essential character test and the last in numerical order rule. Common parlance and commercial understanding assist only where the Tariff is silent or ambiguous.
The sequence, which cannot be skipped
Rule 1: classification is determined by the terms of the headings and the relevant Section or Chapter Notes. The Notes have statutory force and are not guidance.
Rule 2(a) covers incomplete or unfinished articles having the essential character of the complete article, and Rule 2(b) covers mixtures and composite goods.
Rule 3(a) prefers the most specific description. Rule 3(b) applies the essential character test to mixtures and composite goods and to goods put up in sets. Rule 3(c) applies the heading last in numerical order where the first two do not resolve the question.
Rule 4 applies the akin goods test, and Rules 5 and 6 deal with packing and with subheadings.
An opinion that begins with what the trade calls the product, without exhausting the Notes, is not a classification opinion. Courts have repeatedly held that common parlance yields to a specific tariff description.
The principles the courts have settled
A specific entry prevails over a general one. Where an article answers a specific description, it is classified there even if it could also fall within a residuary entry.
The burden of establishing that an article falls within a particular heading, and especially within an exemption, is on the person asserting it.
Sole or principal use governs parts, where the Section Notes so provide, and Westinghouse Saxby is the leading modern authority on that test.
Trade parlance is relevant where the Tariff uses a term of commerce without definition, and the evidence is the market's understanding, established by catalogues, licences, standards and witnesses.
A change in classification without a change in the article or the Tariff requires explanation, and the absence of one supports an argument against suppression and against the extended period.
Building the file
The tariff analysis, written in Rule sequence, with the competing headings identified and the Notes quoted.
The technical file: specification, composition, manufacturing process, drawings, standards and approvals.
The market file: catalogue, price list, sales analysis by application, and the classification used by comparable manufacturers where it can be established.
The history: classification at import, in the pre GST regime, in any advance ruling, and in any departmental acceptance for an earlier period.
A dated internal note recording the reasoning. In a classification dispute, that note is the difference between a debatable interpretation and an unexplained position.
Authorities relied on
The sole or principal use test in the Section Notes prevails over a mechanical application of an exclusion; parts made exclusively for a machine are classified with the machine.
The General Rules of Interpretation apply in sequence and the Section and Chapter Notes have statutory force.
A specific tariff description prevails; commercial understanding is relevant where the tariff does not otherwise resolve the question.
An exemption notification must be construed strictly and ambiguity in it is resolved in favour of revenue; the burden is on the claimant.
What to do on Monday
Write the classification opinion in Rule sequence, with the Notes quoted, for every disputed product.
Align the HSN used in invoices, returns, imports and the pre GST record, and explain any change in a dated note.
Assemble the technical and market files before a dispute, because they cannot be created after one.
Where a product line is borderline and volumes are material, obtain an advance ruling before scaling.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is the HSN code in our invoice binding?
No. Classification is a question of law determined by the Tariff. A wrong code in the master is evidence of the position taken, not a determination of it.
Can classification differ for customs and GST?
The instruments are the same, so a divergence is difficult to sustain and invites a demand in one regime or the other. Align them consciously.
How much weight does an advance ruling carry?
It binds only the applicant and the officer concerned for the transaction ruled on. Rulings of other applicants are persuasive at best and frequently conflicting.
Is a test report decisive?
It establishes composition or characteristics, which is often the disputed fact. It does not decide the legal question of heading.
Can the department reclassify for past periods?
Within limitation, yes. Whether it can invoke the extended period is a separate question, and a disclosed, reasoned position defeats it.
In this cluster
- GST 2.0: two slabs did not end classification litigation, they moved the battle line
- Rate change transition: time of supply, credit notes and stock in hand
- Westinghouse Saxby: the sole or principal use test and the end of easy classification
- HSN, common parlance and the General Rules of Interpretation
- Composite supply versus mixed supply: the test, and the tax
- Principal supply in bundled contracts: getting the rate right
- Food, beverages and the restaurant service rate maze
- Textiles and apparel: the rate structure and the disputes it produces
- Pharmaceuticals and medical devices: the concession and its boundaries
- Automobiles and auto components: the rate bands and the component question
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.