Global communication and trade rely on the postal services. Whether it is shipping essential business paperwork or making eCommerce deliveries, postal logistics ensures seamless connectivity regardless of the distance. In the age of GST compliance, knowledge of the postal service HSN code has become essential to players in the logistics and business sector, as well as government departments. Here is a guide on classification, applicable taxes, and exemptions in the GST regime in India.
What Are Postal Services in the GST Context?
According to the GST terminology, postal services incorporate the transmission of letters, parcels, packages, and other ancillary services such as the sale of postage stamps, postal money orders, and insurance. While India Post operates under special legal conditions, private courier agencies providing similar services are subject to regular GST compliance.
The major difference between government-run and privately operated postal services is the factor that helps determine the proper HSN/SAC code under GST.
What Is the HSN Code for Postal Services?
Under GST, the HSN code of the postal service comes under the SAC 9968, specifically-
- 996811 – Services offered by the Department of Posts through means of speed post, express parcel post, life insurance, and agency services to the Central Government, the State Governments, or Union Territories.
- 996812 – Couriers, who offer their services to deliver documents, parcels, etc, are also provided by the private players.
Although the Department of Posts is exempted under some conditions, the same does not apply to the postal or courier firms in the private sector, as they should charge an amount of GST depending on the classification.
GST Rate on Postal Services
The postal service’s rate of GST varies according to the service provider and type of service –
- India Post services availed by the general public (such as letter post, parcel post, money order, etc.) are not subject to GST.
- India Post renders services to the government agencies under 996811, and these are subject to a tax of 18 percent.
- The GST on other services provided by a private agency is a flat rate of 18 percent.
This governmental taxation exhibits the social welfare aspect of India Post and the commercial aspect of the other players in the field, who are logistics providers.
The importance of HSN Code Classification
Accurate application of the postal service HSN code would help to be compliant in charging, invoicing, and tax filing. Here are the reasons why it is important –
- Assists in applying the right GST rate
- Helps in the correct input tax credit (ITC) of business customers
- Makes smoother GST returns and audit
- Prevents mismatches and verifies taxes
Incorrect classification may result in GST liability or credit blockage, particularly when dealing with high-volume courier payments.
Common Services Covered Under Postal HSN Code
It is important to understand what fits within the HSN code 9968 to avoid confusion in the invoicing –
- Government-operated Network speed post and express parcel services
- Domestic non-public and outside courier services
- Postal insurance services
- Mail tracking and agency services that are available to governmental institutions
Private companies offering logistics support for e-commerce platforms are also required to bill their services at 18% GST under SAC 996812.
Difference Between Postal Services and Courier Services
The difference between postal service and courier service lies in the service providers and patterns of delivery:
- Postal Services – India Post provides postal service in both the rural and urban parts of India, as well as part of the public utility services.
- Courier Services – Provided by organisations such as DTDC, Blue Dart, Delhivery, etc., chiefly aimed at business logistics and with an express character.
Both of them have almost the same work; however, in certain limited cases, only India Post qualifies under the HSN 996811 exemptions.
Impact on Exporters and eCommerce Players
To those who are in the business of exportation, applying the relevant postal service HSN code when sending samples, documentation, or goods to a foreign destination is paramount. It allows for –
- The issue of appropriate GST on courier tariffs
- Claiming on the ITC inward courier invoices smoothly
- False attestations in export records and GST returns
Those who understand the e-commerce business and use courier logistics to ship their orders should also be careful that their vendors do not invoice incorrectly to meet HSN 996812 while fulfilling their orders.
How MSMEs and Startups Should Approach HSN Coding
Small and mid-sized companies usually are unable to handle the HSN classifications because of the absence of in-house compliance teams. There is a lot of dependence on the courier aggregators such as Shiprocket, Pickrr, or Shipyaari. However, companies should make sure that such platforms –
- Mention the postal service HSN code.
- They should also charge GST on their services appropriately
- Offer tax-filing compliant documentation
Any discrepancy in the HSN code may also not allow MSMEs to access full input credit, and this will escalate the costs of production without any justification.
Accuracy in Classification Drives Compliance and Savings
Understanding the postal service HSN code is one of the crucial steps to complying with GST. It determines your eligibility to input tax claims, compliance rating, and bottom line, whether you are a small-time startup using third-party couriers or a large export house that has bulk shipments. With the greater digital and borderless nature of logistics, not being too precise in the tax categorisation is not just a good practice, but also good for your business.
Although proper HSN coding results in compliance, the exporters and other courier-dependent companies struggle with working capital. Credlix is one of the most prominent fintech solutions in the sector of export finance that provides the following solutions:
- Discounting of courier invoices
- Settlement of cross-border payments
- Integration of invoices compatible with GST
Credlix helps businesses grow without liquidity issues by ensuring that suppliers are paid once the logistics costs are covered through export payments.
