HSN code and how it is related to GST?


What is HSN Code?

HSN code stands for “Harmonized System of Nomenclature”. This system has been introduced for the systematic classification of goods all over the world. HSN code is a 6-digit uniform code that classifies 5000+ products and is accepted worldwide. It was developed by the World Customs Organization (WCO) and it came into effect from 1988. Understanding the HSN Code. The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.
  • Each Section is divided into Chapters, Each Chapter is divided into Headings, Each Heading is divided into Sub Headings.
  • Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail.

For example:

Handkerchiefs made of Textile matters HSN : 62.13.90

  • First two digits (62) represent the chapter number for Articles of apparel and clothing accessories, not knitted or crocheted.
  • Next two digits (13) represent the heading number for handkerchiefs.
  • Finally, the last two digits (90) represent product code for handkerchiefs made of other textile materials.

India has 2 more digits for a deeper classification.

If the handkerchiefs are made from a man-made fibre, then the HSN code is

If the handkerchiefs are made from silk or waste from silk., then the HSN code is


HSN codes to be declared

TurnoverNo. of digits of HSN to be declared
Upto 1.5 crore0
1.5 crore- 5 crore2
More than 5 crore4
  • These HSN codes must be declared in every tax invoice issued by the taxpayer under GST.
  • The turnover for previous year will be considered as a basis to find out number of HSN digits to be used.
All 8 digits of HSN code is mandatory in case of export and imports under the GST.

Why is HSN important under GST?
The purpose of HSN codes is to make GST systematic and globally accepted. HSN codes will remove the need to upload a detailed description of the goods. Most importantly, This will save time and make filing easier since GST returns are automated. A dealer or a service provider must provide HSN/SAC wise summary of sales in his GSTR-1 if his turnover falls in above slabs.

Image source: Legal Docs.

Author: Arasu Seran

1 comment:

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