All you need to know about HSN Code under GST

All you need to know about HSN Code under GST

GST

Ritul Patwa

Ritul Patwa

5 Jul 2017, 15:08 — 4 min read

The HSN Code has been adopted in over 200 countries and is an internationally standardised nomenclature for classifying products that are to be traded. Here are some answers to some frequently asked questions about HSN Code under GST.

 

Q 1. What is the HSN Code?

As per Wikipedia – “The Harmonised Commodity Description and Coding System, also known as the Harmonised System (HS) of tariff nomenclature is an internationally standardised system of names and numbers to classify traded products.”


Q 2. Where is HSN Code required under the GST?

The Indian Government has adopted the HSN Code which is an internationally recognised system to identify and classify the products for Goods and Services Tax (GST). The HSN Code will be required at the following levels:

  • At the time of Migration/ Registration to GST, the dealer will be required to mention/ select the HSN Code of the commodity while registering a commodity

  • At the time of generation of invoices under the GST regime, the dealer is required to mention the HSN Code of his commodity as below:


Taxpayers whose turnover is above INR 1.5 crores but below INR. 5 crores shall use 2 digit code and the taxpayers whose turnover is INR 5 crores and above shall use 4 digit code. Taxpayers whose turnover is below INR 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC). Turnover during the first year will be taken on self declaration basis and in the subsequent year the turnover of the preceding year will be used.


Q 3. Which dealers are not under mandatory requirement for use of HSN Code in invoices?

Following dealers are exempted from use of HSN Code in the Invoices:

  • Dealers with turnover less than INR 1.5 crores are not under mandatory requirement for use of even 2 Digit HSN Code

  • Small dealers under Composition Scheme are not required to mention the HSN Code in their invoices 

Q 4. What is the benefit of use of HSN Code under GST?

The benefits of use of HSN Code are as below:

  • It will make GST compatible with global laws and international standards

  • It will reduce the chances of misinterpretation of the product/ commodity

  • It will enable accurate application of the tax rate

  • It will help reduce the errors in the tax rate variance on purchase and sale items

  • It will help government generate statistical data of commodity wise sale, purchase and tax collection to frame its policies and take macro level economic decisions

Q 5. Where can we find the HSN Code of a commodity?

A commodity wise list of HSN Code has been provided on the GST Portal. 

 

It is very essential for a dealer to carefully select the HSN Code of his commodity at the time of migration and/ or fresh registration under GST. This will directly effect the applicable tax rate on his product. Further  it is suggested to bring more awareness amongst the tax professionals as well as the dealers to understand the correct (accurate) use of the HSN Code under the GST.

 

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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.

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