HSN codes for Goods and Service Tax (GST) in India

By Registrationwala

17th May 2017

 

HSN (Harmonised System of Nomenclature) is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).In India; HSN coding is currently used under Excise, Customs, and state Value Added Tax (VAT) laws and is now also proposed to be used under Goods and Services Tax (GST) law, for classification of products/goods. It includes around 5,000 commodity groups; each recognized by a six digit code, organized in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.

The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. More than 98 % of the merchandise in international trade is arranged in terms of the HS.

The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade. Codes under GST

Under Goods and Service Tax law, the HSN code to be utilized by a taxable individual for classification of goods will be based on the taxpayer's turnover. The HSN code needs to be declared on the tax invoice and also to be reported while filing the GST returns.

The HSN codes for mandatory mapping/classification of goods that need to be used by a taxpayer are as follows;

  • Taxpayers whose turnover is Rs. 5 crore and above shall use 4 digit HSN code,
  • Taxpayers whose turnover is above Rs. 1.5 crore but below Rs. 5 crore shall use 2 digit HSN code,
  • Taxpayers whose turnover is below Rs. 1.5 crore are not required to mention HSN code in their invoices.
  • The draft list of HSN codes released and available in the public domain can be assessed on the government GST website.

Under the GST laws, the services will be classified as per the Services Accounting Code(s) (SAC).

2-digit HSN code for goods

The taxpayers with turnover between Rs. 1.5 crore and Rs. 5 crore in the preceding financial year, need to specify HSN codes only at 2-digit chapter level as an optional exercise for the first year of GST operations. From the second year of Goods and Service Tax mechanism, specifying 2-digits part level HSN code will be compulsory for all taxable individuals with a turnover between Rs. 1.5 crores and Rs. 5 crores in the previous financial year.

4-digit HSN code for goods

HSN code of 4 digits will be mandatory for taxpayers having turnover more than Rs. 5 crore in the preceding financial year. Turnover will be considered on the basis of taxpayer's self-declaration for the first year. After completing the first year under GST, the turnover for the previous year will be considered for determining the use of 4-digit HSN codes.

8-digit HSN code for export and import of goods

HSN codes of 8 digits are mandatory in case of export and imports of goods.

Primary benefit of HSN codes

When goods and offerings are perceived via their specific HSN codes, which are globally acceptable, the identification of goods turns out to be simple, and resultantly possibilities of misinterpretation tends to reduce. While filing GST returns online, HSN code in respect of the supply of goods and Services Accounting Code in respect of the supply of services will have to be uploaded, and there will be no need for entering the description of the goods or services while filing GST returns.

 

HSN codes for Goods and Service Tax (GST) in India

2017-05-17