Key Takeaways:
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HSN Code (Harmonised System of Nomenclature Code) is a 4 to 8 digit long code for classification of goods under GST.
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India follows the 8 digit HSN Code, where the last 2 digits indicate the tariff number.
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The HSN digits need to be mentioned in GSTR-1 depends on the turnover of the taxpayer.
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To find HSN number, visit official CBIC-GST portal of GST portal
GST (Goods and service tax) is a tax imposed by the government on the sale or purchase of almost all the goods and services. Through GST, there has been a uniformity in the taxation process. GST is a single tax but the commodities under GST are multiple. The Income Tax Department introduced the concept of HSN code to resolve any confusion and simplify the custom process as well.
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What is HSN Code?
The Harmonized System of Nomenclature (HSN) code is an internationally recognized system for classifying goods. It was developed by the World Customs Organization (WCO) to facilitate uniformity and streamline international trade. Each HSN code is a unique identifier for a specific type of product, ensuring that goods are uniformly classified and taxes and duties are consistently applied across different countries.
HSN code only deals with goods under GST. for services there is another code known as SAC Code.
- Structure: The HSN code is typically a 6-digit code. The first two digits represent the chapter, the next two digits represent the heading, and the last two digits represent the subheading. For certain purposes, countries may add additional digits to the standard six digits.
- Purpose: The primary purpose of the HSN code is to classify goods systematically to facilitate international trade. It helps in identifying the type of product being traded and ensures consistency in trade and taxation processes.
- Benefits: Using HSN codes simplifies the trade process by providing a standardized classification.
- Implementation in India: In India, HSN codes are used under the Goods and Services Tax (GST) regime. Businesses must use HSN codes when filing GST returns, ensuring proper classification and taxation of goods. The number of digits required (4, 6, or 8) depends on the business’s turnover.
HSN Code in India
Since 1986, India has been using HSN numbers in order to classify the commodities for customs and central excise duties. India follows a 8 digit HSN code structure which is divided into chapters (First 2 digits), headings(Next 2 digits), subheadings(following 2 digits) and the last two digits indicating the tariff number.
Understanding What is HSN Code with an Example
Example Product: A leather handbag
- Chapter: The first two digits of the HSN code represent the chapter. Leather products fall under Chapter 42, which covers “Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut).”
- Heading: The next two digits represent the heading within the chapter. For leather handbags, the heading is 42.02, which specifically covers “Trunks, suitcases, vanity cases, executive cases, briefcases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; traveling bags, insulated food or beverage bags, toiletry bags, knapsacks and backpacks, handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco pouches, tool bags, sports bags, bottle cases, jewelry boxes, powder boxes, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber or of paperboard, or wholly or mainly covered with such materials or with paper.”
- Subheading: The final two digits further classify the product within the heading. For handbags, the subheading is 42.02.21, which covers “Handbags, whether or not with shoulder strap, including those without handle, with outer surface of leather.”
Therefore, the HSN code for a leather handbag is 4202.21.
Applicability of HSN Code
As per the CGST notification 78/2020, it is mandatory for the taxpayers to mention HSN number in Table-12 of GSTR-1 as per their annual turnover.
| Turnover | HSN Digits |
|---|---|
| Up to 5 Crore | 4 Digits |
| More than 5 Crore | 6 Digits |
How to Find HSN Code?
If you are a taxpayer and you wish to check the GST percentage of your HSN code or if you do not know your HSN code, you can find the code by providing a description. Follow the below mentioned steps.
Step 1: Visit the official website of CBIC-GST. The landing page looks like this. Alternatively, you can visit the GST portal as well and follow the same steps.
Step 2: Click on the “Service” option to find a dropdown menu.
Step 3: Click on “GST Rate” in the dropdown menu.
Step 4: The HSN Code list will be displayed on your screen. The page looks like this
HSN code was introduced to make the GST systematic. While filing the GST returns, the taxpayers do not need to mention the description of the goods but instead mention the HSN code. The CBIC has also stated that mentioning HSN code is now mandatory in GSTR-1, if you are in the turnover slab provided by the authorities.
Disclaimer: This blog is written to make it easy for readers to understand complicated processes. Some information and screenshots may be outdated as government processes can change anytime without notification. However, we try our best to keep our blogs updated and relevant.
