The Harmonised System of Nomenclature (HSN) is an internationally recognised system of names and numbers for classifying traded products. Each country has its own national customs tariff schedule, which uses the HSN codes. The Goods and Services Tax (GST) in India has adopted the HSN code system to classify goods across the country. Read on to understand what HSN code is, its structure, and its applicability under GST.
The full form of HSN is the Harmonised System of Nomenclature. HSN code is a 2, 4, 6, or 8-digit uniform code that classifies 5,000+ products worldwide. In India, under the GST regime, all goods and services are classified under different HSN codes.
The HSN code has a unique alphanumeric string of digits assigned to each taxable item so that it can be entered into the system for tax payments, returns, and other relevant activities.
The HSN code is more than just a number. It’s an essential tool that is used to determine the applicable GST rate on the products.
Further, the HSN code is important because it helps businesses to:
It also eliminates the need for detailed descriptions of goods, making it easier for both businesses and tax authorities to understand the nature of the transaction. This data can be used for policy making, revenue collection, and other purposes.
Also Read: How Much GST on Health Insurance Should You Pay? Are there Any Benefits?
The purpose of using the HSN code is to ensure uniformity in the classification of goods all over the world. In India, the GST HSN code is a mandatory requirement for businesses with an annual turnover of more than Rs.1.5 crore. It is also required for businesses that import or export goods. Not to mention that even regardless of the annual turnover, all businesses need to mention the GST HSN code on their invoices.
Also, since the HSN code is internationally accepted for classifying products, it is an excellent means to identify trade movements happening domestically and internationally. Government studies the data to formulate and decide policy related to the trade of the products. This information is also used for statistical purposes.
Refer to the table below for a better understanding of HSN code mandate:
|Annual Turnover||HSN Code Mandate|
|Up to Rs.1.5 crore||Not mandatory|
|Rs.1.5 crore to Rs.5 crore||Use of 2-digit HSC code|
|Above Rs.5 crore||Use of 4-digit HSN code|
|Import and Export||Use of 8-digit HSN code|
Let us understand the structure and bifurcation of the HSN code. The HSN code’s first 2 digits (chapter) are used to classify goods across industries. There are 21 chapters in total.
The following 2 digits (heading) are used to classify the goods under each chapter. There are 99 headings in total.
The last 4 digits (subheading) are used finally to classify the goods under each heading. There are 1244 subheadings in total.
For example, say a television set is classified with the HSN code 184.108.40.206. The first 2 digits (85) represent the chapter under which the product falls, and the next 2 digits (28) represent the heading under which the product falls. The next 2 digits (12) represent the specific subheading where the product is listed. Six-digit HSN code is accepted worldwide. The last 2 digits (11) sub-classify the product tariff heading during import and export of supply.
Similarly, if you want to classify a packet of biscuits, the first 2 digits would be 19 (as biscuits fall under chapter 19), and the last 2 digits would be 05 (as biscuits are classified as product 5 under chapter 19). So, the 4 digit HSN code for biscuits would be 1905. Note that the code will differ for different types and ranges of biscuits; for instance, adding chocolate as an ingredient will change the code size and number.
|Sections||HSN Code List|
|Section 1||Live Animals, Animal Products|
|Section 2||Vegetable Products|
|Section 3||Animal or Vegetable Fats and Oils and their cleavage products, prepared edible fats, Animal or Vegetable waxes|
|Section 4||Prepared Foodstuffs, Beverages, Spirits and Vinegar, Tobacco and Manufactured Tobacco Substitutes|
|Section 5||Mineral Products|
|Section 6||Product of the chemicals or allied industries|
|Section 7||Plastics and articles thereof, Rubber and articles thereof|
|Section 8||Raw hides and skins, Leather, Furskins and articles thereof, saddlery and harness, travel goods, handbags and similar s, articles of animal gut ( other than silk-worm gut )|
|Section 9||Wood and articles of wood, Wood charcoal, Cork and articles of cork, Manufacturers of straw, of Esparto or of other Plaiting Materials, Basketwork and Wickerwork|
|Section 10||Pulp of wood or of other Fibrous Cellulosic Material, Recovered ( Waste and scrap ) paper or paperboard, paper and paperboard and articles thereof|
|Section 11||Textile and textile articles|
|Section 12||Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, seat-sticks, whips, riding-crops and parts thereof, Prepared feathers and articles made therewith, Artificial flowers, Articles of human hair|
|Section 13||Articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware|
|Section 14||Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, and articles thereof, Imitation Jewellery, Coins|
|Section 15||Base Metals and articles of Base Metal|
|Section 16||Machinery and mechanical appliances, electrical equipment, parts thereof, sound recorders and reproducers, television image and souch recorders and reproducers, and Parts and Accessories of such article|
|Section 17||Vehicles, Aircraft, Vessels and Associated Transport Equipment|
|Section 18||Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments, parts and accessories thereof|
|Section 19||Arms and ammunition, parts and accessories thereof|
|Section 20||Miscellaneous Manufactured Articles|
|Section 21||Works of art, Collectors’ Pieces and antiques|
The Directorate General of Foreign Trade (DGFT) is the nodal agency responsible for providing the HSN code. The HSN code is also available on the Central Board of Indirect Taxes and Customs (CBIC) website.
HSN code finder is an online tool that helps you to find the correct HSN code for your product. Here’s how you can use the HSN Code Finder:
Step 1: Log in to the CBIC portal.
Step 2: Enter the description of the goods or services your enterprise deals in. For example, if your enterprise deals in cereals, enter ‘Cereals’ in the description box on the top of the page and press enter.
Step 3: A list of goods with their descriptions will pop open. Select the one that matches the description of your enterprise.
Step 4: Note down its HSN code, mentioned on the left side of the description column.
The HSN code is an internationally accepted classification system to ensure that goods are correctly classified and taxed. It is an important feature that aids taxation under the GST regime. Since the unification of indirect taxes with the introduction of GST, the country’s tax structure has overcome many loopholes. HSN helps in identifying and levying taxes on goods and services in India. It was introduced by the Indian Government in 2017 and is applicable throughout the country.
Where the HSN code is used to classify goods across industries, the GST rate is used to classify goods under different GST slabs. Also, depending on their prior turnover, as per GST, most dealers will be required to adopt 2,4,6, or eight-digit HSN codes for the commodities that they provide.
As GST goes in sync with the standards and practices that are accepted internationally, 8-digit HSN codes shall be compulsory for imports/exports.
HSN code is a 6-digit uniform code that classifies 5000+ products worldwide. On the other hand, the Services Accounting Code (SAC) is a 6-digit classification system for services introduced by the Service Tax Department of India.
The Indian taxation system has categorised roughly over 120 services for levy of GST under 5 broad categories or tax slabs that are – 0%, 5%, 12%, 18%, and 28%.
On the other hand, SAC is displayed as follows:
The main difference between the HSN code and the SAC code is that the HSN code is used for goods while the SAC code is used for services.
Also Read: What Is GST On Personal Loans and How Does It Impact Borrowers?
The HSN code is a 6-digit uniform code used to classify large categories of products worldwide and is an essential aspect of GST that businesses need to be aware of. The purpose of using the HSN code is to ensure uniformity in classifying goods globally. Businesses need to mention the HSN code on their invoices if they are registered under GST. Consult your tax advisor to understand the category of your product and its HSN code.
Ans: The HSN code for goods is a 6-digit numbering system used to classify products across industries.
Ans: To find the HSN code of your product, first, visit the official GST page. Next, select the chapter, heading, and subheading under which your product is classified. The HSN code of your specific category will be displayed here.
Ans: The HSN code is structured as follows:
The first 2 digits represent the chapter in which the product is classified.
The next 2 digits represent the heading under which the product is classified.
The last 4 digits represent the subheading under which the product is classified.
Ans: All businesses must mention the HSN code on their invoices if they are registered under GST. This is done to ensure uniformity in product classification.
Ans: The difference between the SAC code and the HSN code is that the SAC code is a 6-digit numbering system used to classify services under GST. In contrast, the HSN code is a 2, 4, 6, or 8-digit numbering system used to classify products across industries under the GST regime.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 194IB||Section 44AA||Section 80E|
|Section 195||Section 80EEA||Section 80DD|
|Section 80CCC||Section 80GG||Section 80 G|
|Section 54F||Section 1941A||Section 10|
|Section 194Q||Section 192||Section 269SS|
|Section 80DDB||Section 44AD||Section 194C|
|Section 194A||Section 194H||Section 80D|
|Section 80C||Section 80C, 24(b), 80EE & 80EEA||Section 234A|
|Section 50C||Section 80C||Section 80EEA|
|Section 194B||Section 194J||Section 206C|
|Section 80CCG||Section 80 EEB||Section 24Q|
|Section 40b||Section 194C||Section 54EC|
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