VAT Rate Applied to Processing Auto Parts from Steel Box Materials
RegHub explainer by New MarketerLast updated:
Based on:Nghị định số 174/2025/NĐ-CP; Nghị quyết số 204/2025/QH15 - Ministry of Finance
This explanation was generated by AI and checked by an automated AI review, not by a human expert. It is not legal, tax or accounting advice and may contain errors. Check the official document before you rely on it.
The Ministry of Finance confirms that 10% VAT is correct for PT Precision Mechanical Company's service of processing auto parts from steel box materials. Under Article 1 of Decree No. 174/2025/ND-CP, product codes 241006 and 241008 (level-6 codes) are listed in Appendix I as goods excluded from VAT reduction - therefore the 8% reduced rate does not apply. The company's invoicing at 10% was correct. The customer's argument that the product falls under industry code group 25 and qualifies for the 8% rate has no basis under current regulations. For businesses using the credit method, the 8% VAT rate applies only to goods and services specified in Article 1 Clause 1 of Decree 174 - which does not include codes 241006 and 241008.
Question
PT Precision Mechanical Company (Công ty TNHH Cơ khí chính xác PT) processes and manufactures auto parts from steel box materials (steel box bars for vehicle chassis systems). The company classified the product under level-6 codes 241006 and 241008 per Decision No. 43/2018/QD-TTg (Vietnam Product Industry Classification System), which fall under Appendix I of Decree No. 174/2025/ND-CP as goods excluded from VAT reduction, and accordingly invoiced at 10% VAT. The customer argued the product falls under industry code group 25 (not in the excluded list) and should attract 8%. The company requested Ministry of Finance guidance on the correct VAT rate.
Official guidance
Phu Tho Provincial Tax Department responded based on Article 1 of Decree No. 174/2025/ND-CP dated 30/06/2025 implementing VAT reduction policy under National Assembly Resolution No. 204/2025/QH15 dated 17/6/2025:
- The VAT reduction for goods and services specified in Clause 1 of this Article applies uniformly at import, manufacturing, processing, and commercial trading stages.
- Goods and services listed in Appendices I and II of this Decree are NOT eligible for VAT reduction or are subject to the 5% VAT rate.
- Businesses using the credit method may apply the 8% VAT rate only to goods and services specified in Clause 1 of this Article.
After reviewing the economic contract and the items listed on PT Precision Mechanical Company's sales invoices against Appendix I of Decree No. 174/2025/ND-CP: the company's goods (level-6 codes 241006 and 241008) are in the list of goods not eligible for VAT rate reduction. Therefore, the 10% VAT rate the company applied is correct.
Action points
- Continue issuing VAT invoices at 10% for auto parts processing services from steel box materials (codes 241006, 241008).
- Inform the customer that this product is listed under Appendix I of Decree No. 174/2025/ND-CP as excluded from VAT reduction, and the 8% rate does not apply.
- Retain this guidance from Phu Tho Provincial Tax Department for future audit or inspection purposes.