IS HSN CODE OF GOODS MANDATORY UNDER GOODS & SERVICES TAX (GST) IN INDIA?

Posted By on March 20, 2017

FAQ 1 : What is HSN Code?

Ans. As per Wikipedia – “The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products.”

FAQ 2 : Where HSN Code is required under the GST?

Ans. The Indian Government has adopted HSN Code which is an internationally recognised system to identify and classify the products for Goods and Services Tax (GST). The HSN Code will be required at the following levels:-

a) At the time of Migration/ Registration to GST, the dealer will be required to mention/ select the HSN Code of the Commodity while adding a commodity in its GST Registration;

b) At the time of generation of Invoices under the GST Regime, the dealer is required to mention the HSN Code of his commodity as below:-

Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4 digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC). Turnover during hte first year will be taken on Self Declaration basis and in the subsequent year the Turnover of the Preceding Year will be used.

FAQ 3 : Which Dealers are not under mandatory requirement for use of HSN Code in Invoices?

Ans. Following dealers are expemted from use of HSN Code in the Invocies:-

a) Dealers with Turnover less than 1.50 Crores are not under mandatory requirement for use of even 2 Digit HSN Code;

b) Small Dealers under Composition Scheme are not required to mention the HSN Code in their Invoices;

 

FAQ 4 : What is the benefit of use of HSN Code under GST?

Ans. The benefits of use of HSN Code are as below:-

a) It will make GST Compatible with the Global Laws of International Standards;

b) It will reduce the chances of misinterpretation of the product/ Commodity;

c) It will enable accurate application of the Tax Rate;

d) It will help reduce the errors in the Tax Rate variance on Purchase and Sale items;

e) It will help government generate statistical data of Commodity wise sale, purchase and tax collection to frame its policies and take macro level economic decisions;

FAQ 5 : Where can we find the HSN Code of a Commodity?

Ans. Commodity wise list of HSN Code has been provided on the GST Portal. The link of the same is noted below for ready reference:-

https://www.gst.gov.in/documents/HSN.pdf

 

OUR COMMENTS : It is very essential for a dealer to carefully select the HSN Code of his commodity at the time of Migration and/ or fresh registration under GST. This will directly effect the applicable Tax Rate on his Product. Further  it is suggested to bring more awareness amongst the Tax Professionals as well as the Dealers to understand the correct (accurate) use of the HSN Code under the GST.

HSN CODE NOTIFICATION-page-001

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The Views expressed on this blog are strictly personal and for knowledge of our clients only. The contents of this blog are solely for informational purpose and it does not constitute any professional advice or recommendation. The laws related to GST and other taxes are under evolution and subject to constant changes and amendments over time. It is suggested to take specific legal advice and necessary due diligence before relying on the contents and information of this Blog. The authors of this blog, does not accept any liabilities for any loss or damage of any kind arising out of information on this blog and for any actions taken in reliance thereon.