What is HSN Code ?

HSN stands for Harmonized System of Nomenclature, a standardized system of names and numbers used to classify goods in international trade. HSN codes are a part of this system and are used to classify goods based on their nature, composition, and usage. In India, HSN codes classify goods to levy the Goods and Services Tax (GST). Each product is assigned a unique HSN code, which helps determine the GST rate applicable to the product. HSN codes are divided into chapters, each covering a specific product category. Using HSN codes helps streamline the tax collection process and makes it easier for businesses to comply with GST regulations.

How does HSN Code work ?

HSN codes provide a standardized system for classifying goods based on their nature, composition, and usage. Each product is assigned a unique HSN code, which helps determine the GST rate applicable to the product. The HSN code is a numerical code that is generally 6 to 8 digits long. The first 2 digits of the HSN code represent the chapter under which the product falls, the next 2 digits represent the heading, and the remaining digits represent the product's subheading or tariff item. For example, you want to classify a product under the HSN code system. The first step is to identify the chapter under which the product falls. Suppose the product is a computer monitor. The chapter under which it falls is Chapter 85 - Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles. The next step is to identify the heading under which the product falls. In this case, the heading is 85.28, which covers "Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus." The final step is identifying the tariff item or subheading that specifically applies to the product. In this case, the tariff item is 8528.51, which covers "Monitors, not incorporating television reception apparatus, with a screen size not exceeding 19 inches." Once you have identified the correct HSN code for your product, you can determine the GST rate applicable to it and calculate the amount of tax payable. Using HSN codes helps streamline the tax collection process and makes it easier for businesses to comply with GST regulations.

What is HSN Code in India ?

In India, the HSN code stands for Harmonized System of Nomenclature code, a globally accepted system of names and numbers used to classify goods in international trade. The HSN codes are used in India to classify goods to levy the Goods and Services Tax (GST). HSN codes in India are 6 to 8-digit numerical codes. The first 2 digits represent the chapter, the next 2 digits represent the heading, and the remaining digits represent the subheading or tariff item. The codes are organized hierarchically, with each level providing more specific details about the product. Using HSN codes in India helps streamline the tax collection process and makes it easier for businesses to comply with GST regulations. It also provides a standardized system for classifying goods based on their nature, composition, and usage. Each product is assigned a unique HSN code, which helps determine the GST rate applicable to the product.

HSN under GST

In GST, all goods and services supplied in India have been classified - Goods are classified under the HSN Code and Services are classified under the SAC Code. Based on the HSN or SAC code, GST rates have been fixed in five slabs, namely 0%, 5%, 12%, 18% and 28%.

Under GST, the majority of dealers will need to adopt two-, four-, or eight-digit HSN codes for their commodities, depending on their turnover the year prior.

• Dealers with turnover of less than Rs 1.5 crores will not be required to adopt HSN codes for their commodities.
• Dealers with turnover between Rs 1.5 crores and Rs 5 crores shall be required to use 2 digit HSN codes for their commodities.
• Dealers with turnover equal to Rs 5 crores and above shall be required to use 4 digit HSN codes for their commodities.
• In the case of imports/exports, HSN codes of 8 digits shall be compulsory, as GST has to be compatible with international standards and practices.

Understanding HSN code

The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.

• Each Section is divided into Chapters. Each Chapter is divided into Headings. Each Heading is divided into Sub Headings.
• Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail.

HSN Number Format & Structure

• First two digits (CH) represent the chapter number.
• Next two digits (HD) represent the heading number for materials
• Next two digits (SH) is the product code for materials.
• Next two digits (SS) is the product sub division code materials.

What is SAC?

SAC stands for Service Accounting Code, a unique code used to classify services under India's Goods and Services Tax (GST) regime. It is similar to the HSN (Harmonized System of Nomenclature) code used for goods classification. The SAC is a numerical code consisting of 6 digits used to identify specific services for taxation. The first two digits of the SAC represent the major service category, while the next two digits represent the sub-category of the service. The final two digits represent the specific service. Using SAC codes in GST makes it easier for businesses to classify services for taxation. Each service is assigned a unique SAC code, which helps determine the applicable GST rate. Using SAC codes also helps in the proper valuation of services and reduces the scope for errors in tax calculation. Registered taxpayers must mention the appropriate SAC code in their GST invoices while offering services. This helps in the proper accounting and reporting of services for GST purposes.

What is importance of HSN ?

The importance of HSN (Harmonized System of Nomenclature) codes can be explained by the following points:

1. Standardization: HSN codes provide a standardized system for classifying goods based on their nature, composition, and usage. This helps in the proper valuation of goods and reduces the scope for errors in tax calculation. It also helps in the proper identification of goods for the purpose of international trade.
2. GST Compliance: In India, the use of HSN codes has been made mandatory under the Goods and Services Tax (GST) regime for registered taxpayers with a turnover exceeding Rs. 1.5 crore. The use of HSN codes helps streamline the tax collection process and makes it easier for businesses to comply with GST regulations. Each product is assigned a unique HSN code, which helps determine the GST rate applicable to the product.
3. Data Analysis: The use of HSN codes helps the government track the revenue collection and analyze the tax data. It also helps businesses to maintain accurate records and facilitates easier audits. The HSN code data can be used for various purposes such as trade analysis, product pricing, market research, and policy formulation.
4. International Trade: HSN codes are used globally for the classification of goods. It helps in the proper identification of goods for the purpose of international trade and ensures that the goods are properly classified for customs and other regulatory purposes. The use of HSN codes also helps in the smooth flow of goods across borders.

In summary, the importance of HSN codes lies in their ability to provide a standardized system for the classification of goods, streamline the tax collection process, facilitate data analysis and international trade, and ensure compliance with GST regulations.

What is importance of HSN when Filing Invoice ?

GST returns are completely automated, it will be hard for the dealers to upload the description of the products being supplied. Hence, HSN Codes shall be automatically picked up from the registration details of the dealer and will reduce the efforts thereby. Dealers have to be careful in choosing the correct HSN/SAC code while migrating to GST or making a fresh registration.

Who are not required to use HSN?

Dealers with turnover of less than Rs 1.5 crores will not be required to adopt HSN codes for their commodities.

How to search HSN ?

First narrow down to Chapter, then Section. Then select a HSN code which best describes your commodity.

How to complain about illegality of HSN Code?

You can inform to the respective authorities [Gurgaon / Noida] know of the illegality usage of GST Number by e-mailing them and also call them at https://www.gst.gov.in/contact | +91 124 4688999 / +91 120 4888999.

HSN/SAC codes are unique identification codes for products and services in GST. HSN Code refers to Harmonized System of Nomenclature. Search and Find HSN Codes, SAC codes & GST Rates of goods and services under GST in India using WhiteBooks GST Software. To make the dealers work simplified while filing Invoice WhiteBooks Software provides a tool for the HSN/SAC code search to know the exact code of the product. The HSN/SAC code will automatically load the description of the products being supplied.

Use WhiteBooks GST Calculator tool to Know the Total Amount. Our WhiteBooks GST Software for filing the Invoices which contains all HSN Codes inbuilt that make the dealers work simplified by automatically load the description of the products being supplied.