All About HSN Code 5109

The Harmonized System (HSN) Code is an internationally recognized classification system for goods and services, essential for taxation, trade, and regulatory compliance. In India, businesses use the HSN code system for GST categorization, ensuring accurate tax calculations and compliance with legal frameworks. One such critical classification is HSN Code 5109, which applies specifically to yarn composed of wool or fine animal hair packaged for retail sale. This category holds immense significance in the textile industry, particularly for businesses involved in the sale and trade of wool-based yarns. In this guide, we will cover the details of HSN Code 5109, its applications, importance, GST implications, and much more.

What is HSN Code 5109?

HSN Code 5109 refers to yarn that is primarily composed of wool or fine animal hair and is packaged for retail sale. This classification falls under Chapter 51 of the HSN system, which deals with wool, fine animal hair, and their derivatives. This type of yarn is generally available in smaller quantities, targeting end-users rather than large-scale industrial applications. The materials classified under this code are widely used in garment manufacturing, home textiles, crafting, and luxury apparel.

What Products Fall Under HSN Code 5109?

To qualify under HSN Code 5109, yarn must meet the following criteria:

1. Composition: It must consist predominantly of wool or fine animal hair with a minimum content of 85% by weight.

2. Retail Packaging: The yarn must be specifically packaged for direct retail sale, generally in smaller quantities.

3. Varieties Covered:

• Worsted yarns

• Fine wool yarns

• Luxury yarns like cashmere, alpaca, and mohair

Examples of Yarn Under HSN Code 5109:

• Cashmere yarn (from cashmere goats, known for its softness and high value)

• Alpaca yarn (commonly used in premium apparel and winter garments)

• Regular wool yarn (used for sweaters, scarves, and gloves)

• Angora yarn (a luxury fiber from angora rabbits, used in high-end fashion)

Importance of HSN Code 5109 in Trade

The classification of HSN Code 5109 holds significance in both domestic and international trade for various reasons:

1. Facilitates Trade Compliance

• Proper classification ensures smooth customs clearance for businesses dealing in wool yarns.

• Prevents trade disputes by ensuring transparency in product categorization.

2. GST Compliance and Taxation

• In India, HSN Code 5109 is crucial for calculating GST rates.

• The standard GST rate applicable for yarn under this category is 5%.

• Businesses must correctly classify their goods under this code to avoid taxation errors.

3. Simplifies Inventory Management

• Many businesses use HSN codes for efficient stock management and tracking.

• Helps retailers and wholesalers streamline their inventory and stock-keeping units (SKUs).

4. Determining Import Duties

• When importing wool-based yarns, HSN Code 5109 helps in the correct application of import tariffs and duties.

• Ensures accurate cost assessments for businesses purchasing raw materials.

Subcategories of HSN Code 5109

HSN Code 5109 can be further broken down into three primary subcategories:

This categorization ensures that businesses and traders can precisely classify their yarn products for regulatory and taxation purposes.

Applications of Yarn Under HSN Code 5109

The yarns classified under HSN Code 5109 have diverse applications across multiple industries:

1. Fashion and Apparel

• Used in the production of high-end sweaters, scarves, gloves, hats, and jackets.

• Luxury brands utilize cashmere and angora yarn for premium clothing lines.

2. Home Textiles

• Wool and fine animal hair yarns are used in blankets, rugs, upholstery, and wall hangings.

• These materials are especially popular in cold climates due to their warmth and durability.

3. Crafting and DIY Projects

• Hobbyists and DIY enthusiasts use these yarns for knitting, crocheting, and weaving.

• The variety of textures and colors makes them ideal for custom home decor and accessories.

4. Industrial and Automotive Use

• While primarily for retail, some yarns under HSN Code 5109 are also used in industrial applications, including automotive upholstery and technical textiles.

GST Rate and Tax Implications for HSN Code 5109

The GST rate for HSN Code 5109 is typically 5%, but businesses should check updated GST slabs periodically.

Taxation Breakdown:

• CGST (Central GST): 2.5%

• SGST (State GST): 2.5%

• IGST (Integrated GST for Interstate Transactions): 5%

Businesses must classify their yarn products accurately to avoid tax discrepancies and penalties.

Conclusion

HSN Code 5109 is vital for the textile industry, enabling businesses to categorize wool and fine animal hair yarns effectively for trade, taxation, and inventory purposes. Understanding this classification helps businesses comply with GST regulations, manage supply chains, and ensure accurate pricing in global and domestic markets. With proper classification, businesses can avoid legal complications and streamline their trade processes, ensuring efficient and profitable operations in the textile sector.

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FAQs

Q1. What is the GST rate for HSN Code 5109?

Ans. The GST rate applicable is generally 5%, but it is advisable to check updated GST notifications.

Q2. Which products fall under HSN Code 5109?

Ans. Products include wool yarn, cashmere yarn, and fine animal hair yarn that are packaged for retail sale.

Q3. Can industrial yarns be classified under HSN Code 5109?

Ans. No, this classification specifically applies to retail-packaged yarn intended for end consumers.

Q4. What documents are required for GST compliance under HSN Code 5109?

Ans. Businesses need GST-compliant invoices, product specifications, and classification details for smooth trade operations.

Q5. How does HSN Code 5109 impact international trade?

Ans. It ensures correct customs classification, reducing trade barriers and facilitating easier import/export processes.