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What is GST HSN Code?

The Harmonized System of Nomenclature or HSN code has been introduced for the proper classification of goods worldwide. The GST HSN code is a uniform 6-digit code that is universally accepted and it categories over 5000 products. It has been effective since 1988 and was developed by the World Customs Organization (WCO).

How HSN Code Works?

There is a 6-digit HSN code with the GST Rate given to over 5000 commodity groups arranged in a logical and legal order. The rules are well defined for it to achieve a similar classification.

Why HSN Code is Important?

The HSN is mainly used to classify goods from different parts of the world in a logical and systematic order. It brings in the equal classification of items in order to support international trade.

Why HSN Code is used across the world?

More than 200 nations use HSN system across the world for different reasons like –

  • The base for custom tariffs
  • Equal classification of goods
  • Collection of global trade statistics

   Download Free HSN Code List

Free GST HSN Code List

More than 98% of the products are classified in the Harmonized System of Nomenclature in international trade practices. Most countries accept the HSN code for services. However, in some countries, HSN code varies a bit, on the basis of the type of goods. 

What About The Usage of HSN Code in India?

India became the part of WCO in 1971. Originally, it was using HSN codes of 6 digits for products in Central Excise and Customs. Later on, two more digits had been added by Central Excise and Customs to make codes even more precise and it resulted in the classification of 8 digits.

Breakdown of HSN Code Structure

The HSN code includes around 1244 headings, 21 sections, 99 chapters, and 5,224 subheadings.

  • Each section is categorized with chapters, and each chapter is split into headings and each heading into subheadings.
  • Chapter and section titles include different categories of items and subheadings and headings explain products into detail.

Let’s assume a cotton handkerchief with code 62.13.90 –

  • 62 – The first 2 digits represent the chapter for articles of clothing and apparel, not crocheted or knitted
  • 13 – The next two numbers are the heading number for the product.
  • 90 – The last 2 digits represent the product code for a product made of other textiles.

For deeper classification, two more digits are added in India. For example, the HSN code of 62.13.90.10 is given for handkerchiefs made of artificial fibre. HSN code of 62.13.90.90 is given to handkerchief which is made of silk or silk waste.

What is (SAC) Services Accounting Code?

Services are also uniformly categorized for measurement, recognition, and taxation like goods. These codes are known as SAC or Services Accounting Code.

      Download Free SAC Code List

Click To Download

For example, certification and legal documentation services related to copyrights, patents, and other rights related to intellectual property, such as 998213.

  • 99 – It is permanent for all services.
  • 82 represent the type of service, i.e. legal service in this case
  • 13 The last two digits represent the details of service, for example, legal procedures for patents.

Why was the implementation of the HSN Code was mandatory post-GST implementation?

Whenever a new tax regime comes, it is essential to ensure that its adoption is easy, simple to understand, and acceptable by the citizens; is not biased.

HSN codes bring that systematicity. They remove the need to add a detailed description along with the products or services.  This assures proper time-management and that the time is spent on other important activities.

If you wish to download HSN Code Click

FAQ’S – HSN CODE

The full form UQC is Unique Quantity Code. As the name suggests, it is a unit of measurement such as 1 kilogram of rice is mentioned as 1 KGS in the invoice. 10 Liter of oil is mentioned as 10000 MLT. Etc.

As per CGST rules under GST, tax invoice, credit note & debit note must have quantity unit description or UQC.

Under the amended Rule 46 of CGST 2017, dated 15.10.20, it is made mandatory to provide HSN code upto 4 digits in the B2B invoices by the taxpayers with turnover upto Rs. 5 Crore in the preceding financial year with the effect from 1.4.2021. For the taxpayer with turnover above Rs. 5 Crores, providing HSN code upto 6 digits is mandatory with effect from 1.4.2021.

HSN codes are universal codes accepted internationally for classifying all the products worldwide. HSN codes give a systematic way of classifying the products, thereby reduces the chances of any errors or misinterpretation. Providing HSN codes will make the GST implementation easy & will easily ensure proper levy of taxes.

As of now, more than 5 HSN codes cannot be added. However, this doesn’t mean that you cannot deal in other products. Top 5 HSN codes can be added on GST portal.

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