HSN code, which stands for Harmonized System of Nomenclature, is a system of classification of goods used for taxation purposes. It is an internationally recognized system used to classify goods and services for trade and taxation purposes. HSN codes are used in more than 200 countries worldwide and help in the smooth flow of goods across borders.
In India, HSN codes are used for the purpose of taxation under the GST regime. GST, which stands for Goods and Services Tax, is a value-added tax that is levied on the supply of goods and services in India. Under the GST regime, all goods and services are classified under a specific HSN code to determine the applicable tax rate.
Tally, which is one of the most popular accounting software in India, supports the use of HSN codes for GST compliance. In this blog, we will discuss what HSN codes are, their importance in GST compliance, and how to use them in Tally.
What are HSN Codes?
HSN codes are a system of classification of goods based on their nature, characteristics, and usage. The HSN system was developed by the World Customs Organization (WCO) to facilitate international trade by providing a common language for the classification of goods. HSN codes are used by customs authorities around the world to determine the tariff rates applicable to goods being imported or exported.
HSN codes are structured in a hierarchical manner, with a six-digit code representing the most general category of goods and services. Each subsequent digit provides more specific information about the nature of the product or service. In India, HSN codes have been further expanded to eight digits for greater specificity.
Importance of HSN Codes in GST Compliance
HSN codes are an essential component of GST compliance in India. Every business registered under GST must use HSN codes to classify their goods and services for the purpose of tax calculation. The GST rate applicable to a particular product or service is determined based on its HSN code.
HSN codes make it easier for businesses to comply with GST regulations by providing a standardized system for the classification of goods and services. They also make it easier for tax authorities to verify the accuracy of tax returns filed by businesses.
Using HSN Codes in Tally
Tally supports the use of HSN codes for GST compliance. To use HSN codes in Tally, you need to first enable the feature by following these steps:
- Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation.
- Select “Yes” for the option “Enable GST?”
- Select “Yes” for the option “Set/Alter GST Details?”
- Select “Yes” for the option “Enable HSN/SAC details?”
Once you have enabled the HSN/SAC details feature, you can start using HSN codes in Tally. To do this, follow these steps:
- Create a new invoice or open an existing one.
- Select the item for which you want to enter the HSN code.
- Press Ctrl+H to open the HSN/SAC details screen.
- Enter the relevant HSN code in the “HSN/SAC” field.
- Press Enter to save the HSN code.
Conclusion
HSN codes are an essential component of GST compliance in India. They provide a standardized system for the classification of goods and services, making it easier for businesses to comply with GST regulations. Tally supports the use of HSN codes for GST compliance, making it easy for businesses to use HSN codes in their accounting and invoicing processes.
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Frequently Asked Questions (FAQs)
Q. What is HSN code in Tally?
HSN code stands for Harmonized System of Nomenclature code, and it is a system of classification of goods and services used for taxation purposes in India. Tally supports the use of HSN codes for GST compliance, which makes it easier for businesses to classify their goods and services for the purpose of tax calculation.
Q. Why are HSN codes important in Tally?
HSN codes are important in Tally because they are an essential component of GST compliance in India. Every business registered under GST must use HSN codes to classify their goods and services for the purpose of tax calculation. The GST rate applicable to a particular product or service is determined based on its HSN code.
Q. How do I enable HSN code in Tally?
To enable HSN code in Tally, follow these steps:
Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation.
Select “Yes” for the option “Enable GST?”
Select “Yes” for the option “Set/Alter GST Details?”
Select “Yes” for the option “Enable HSN/SAC details?”
Q. How do I enter HSN code in Tally?
To enter HSN code in Tally, follow these steps:
Create a new invoice or open an existing one.
Select the item for which you want to enter the HSN code.
Press Ctrl+H to open the HSN/SAC details screen.
Enter the relevant HSN code in the “HSN/SAC” field.
Press Enter to save the HSN code.
Q. What is the format of HSN code in Tally?
The format of HSN code in Tally is an eight-digit code, where the first two digits represent the chapter, the next two digits represent the heading, and the last four digits represent the subheading.
Q. How do I search for HSN code in Tally?
To search for HSN code in Tally, follow these steps:
Go to Gateway of Tally > Display > Statutory Reports > GST > HSN/SAC Report.
Select the relevant tax period.
Enter the HSN code or part of it in the search field.
Press Enter to view the results.
Q. Can I import HSN code in Tally?
Yes, you can import HSN code in Tally. To do this, follow these steps:
Go to Gateway of Tally > Display > Statutory Reports > GST > HSN/SAC Report.
Click on the “Import” button.
Select the file containing the HSN codes to import.
Map the columns in the import file with the fields in Tally.
Click on “Import” to complete the process.
Q. What are the benefits of using HSN code in Tally?
The benefits of using HSN code in Tally include:
Standardization: HSN codes provide a standardized system for the classification of goods and services, making it easier for businesses to comply with GST regulations.
Accuracy: HSN codes make it easier for tax authorities to verify the accuracy of tax returns filed by businesses.
Time-saving: HSN codes make it easier and faster for businesses to classify their goods and services for the purpose of tax calculation.
