Unhappy toy story – A classification conundrum under GST

27 January 2021

by Nivedita Agarwal Nirav Sanjay Karia


The toy industry in India has seen quite a few developments over the past few years. Taking steps in line with the vision of making India a global manufacturing hub for toys, the government has devised a comprehensive action plan to boost production and sale of indigenous toys across the country. Accordingly, the government has significantly increased the customs duty on toys. Further, the toy manufacturers have been mandated to comply with the quality control and safety standards. In spite of these efforts, the toy industry has not evolved the way it should have. One of the reasons attributable for the dismal growth of this industry could be the classification issue under the Goods and Services Tax regime, with multiple rates and ambiguous wordings.

It may be noted that an incorrect classification can result in grave consequences to the business and its reputation. This article analyses the controversial issue relating to the classification of 'different kinds of toys products’ under GST.

Relevant entries for classification

The Central Government had, in exercise of its powers under Section 9 of the Central Good and Services Tax Act, 2017, issued Notification No. 1/2017-CT(Rate), dated 28 June 2017 (‘Rate Notification’) which prescribes the rate of tax (Schedules) for specified goods.

The relevant entries for classification of various kinds of toys are as under:

Schedule II – 12%

S. No./Entry No.

Chapter/ Heading/ Sub-Heading/ Tariff Item




Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof) [other than electronic toys]



Playing cards, chess board, carom board and other board games, like ludo, etc. [other than Video game consoles and Machines]


Schedule III – 18%

S. No./Entry No.

Chapter/ Heading/ Sub-Heading/ Tariff Item




Electronic Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof)



Video game consoles and machines, articles of funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment [other than playing cards, ganjifa card, chess board, carom board and other board games of 9504 90 90 like ludo, etc.]


Any Chapter

Goods which are not specified in Schedule I, II, IV, V or VI


While the Rate Notification under GST provides the rate of tax on goods and services, one has to read the same along with the First Schedule (including the Section and Chapter Notes and General Explanatory Notes) of the Customs Tariff Act, 1975 (‘CTA’) in order to interpret the Rate Notification for purposes of levy of GST.[1] The relevant Chapter and Tariff Items in the present case are as follows:

Chapter 95: Toys, games and sports requisites; parts and accessories thereof[2]

Tariff Item



Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; reduced-size (‘scale’) models and similar recreational models, working or not; puzzles of all kinds.


Video game consoles and machines, articles of funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment.


On a plain reading of the above entries, it is clear that the tariff headings under Customs Tariff Act are broadly divided into two categories under GST: electronic products and non-electronic products. While electronic toys and games attract higher rate of tax i.e. 18% (Schedule III), non-electronic toys attract lower rate of tax i.e. 12% (Schedule II). The intention of the legislature for implementing the same is probably that non-electronic toy products like toy cars, chess, cards etc. are games of common use which are important for child’s development and therefore, should be affordable to the masses. On the other hand, electronic toys like video games, casino games, etc. are luxury items, purchased by the more affluent section of the society and therefore attract the higher rate of GST @18%.

However, let us delve deeper to analyse whether the classification is really this simple.

GST rate notification v. Customs Tariff Act

It is pertinent to note that the GST rates under the Rate Notification are specified on the basis of tariff headings given under the Customs Tariff Act.

Under Customs Tariff Act, Heading 9503 includes tricycles, scooters, pedal cars and similar wheeled toys, dolls' carriages, dolls, other toys, puzzles of all kinds etc. In order to understand the real scope and meaning of the entry, one must refer to the relevant entries of Harmonized System of Nomenclature (‘HSN’) Explanatory Note on which the Customs Tariff Act is based.

The HSN Explanatory Notes provides a long illustrative list of what kind of toys can come under the term “other toys”. It includes toy pistols and guns, constructional toys, toys representing animals, toy clocks, educational toys, skipping ropes, toy musical instruments, dolls’ houses, etc. In short, it includes various kinds of toys which are not included specifically under any other heading of Chapter 95. Hence, we can say that the scope of the Heading 9503 under the Customs Tariff is quite wide.

Sl. No 228 of Schedule-II of the Rate Notification covers “Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof) [other than electronic toys]”. A question that arises here is whether the toys like guns, skipping ropes, musical toys and the toys which fall under the scope of “other toys” in the HSN explanatory note can be classified under this entry. The use of word “like” and “etc” in the said entry creates ambiguity about the actual scope of the entry. In the regard, the department might contend that the use of the words “like” and “etc” in the above Sl. No. has restricted the scope only to those goods which are in nature of/or similar to “tricycles, scooters, pedal cars, etc.” . Further, in the absence of any specific entry covering these products in question, the Department may classify the said products under the residuary entry i.e. Sl. No. 453 of Schedule-III on which GST is applicable @18%.

On the other hand, an assessee can argue that the use of word “etc” in Sl. No. 228 & Sl. No. 440 would extend the coverage to also include “other toys” that are not in nature of / similar to “tricycles, scooters, pedal cars or similar wheeled toys” for example, toy guns or pistols, toy representing animals, educational toys, etc. which are otherwise included in the same tariff heading of the Customs Tariff Act. In this regard, resort may also be taken to the intent of the legislature while introducing these entries.

It can be said that a pandora’s box for classification of toys has been opened where there are two competing entries under the same notification. Since there is no guiding principle for classification of various toys, the difference between 12% and 18% may have a long-lasting impact on the businesses of toy manufacturers.


In this period of economic difficulties, it is unfortunate that there is no clarification from the Department on the classification of the toy products. The Government instead of proactively clarifying its stand on the issue, chose to wait, and when the taxpayers make supplies discharging tax at 12%, ask them to discharge their liability at the rate of 18%. The issue needs to be addressed at the earliest if our country wants to be a global toy production hub. Adequate clarity from the department will go a long way in adoption of proper principles, ensure appropriate classification and finally the GST rate. The toy story can end well only if these problems are addressed and the government manages to bring the industry out of the woods.

[The authors are Principal Associate and Joint Partner, respectively, in GST Advisory practice at Lakshmikumaran & Sridharan Attorneys, Mumbai]



[1] Explanation to the Rate Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017.

[2] Customs Tariff Act, 1975, Chapter 95.

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