Updated HSN Code For Traders

HSN is the acronym for Harmonised System of Nomenclature. Developed by the World Customs Organisation in the 1980s, the main aim of HSN is to classify all goods and services in a systematic manner.

HSN Codes clears the confusion and improves both domestic and international trade. Today, thousands of goods that constitute 90 per cent of world trade are exchanged between countries using HSN Codes. Today, India is one of the many nations that uses the HSN Code procedure.

HSN Codes are mainly used by dealers and traders, who adopt two-digit, four-digit, six-digit, and eight-digit HSN Codes depending on the following:

  • If the business turnover is less than Rs 1.5 crore, then there is no need to adopt HSN Codes.
  • If the business turnover is between Rs 1.5 crore and Rs 5 crore, then a two-digit HSN Code is adopted.
  • If business turnover is over Rs 5 crore, then a four-digit HSN Code is adopted for business
  • In case of import or export dealings, a six-digit HSN Code is employed. However, India employs an eight-digit HSN code to make the categorisation of goods more streamlined.

The idea behind coding various goods under the HSN code is to make filing Goods and Service Tax (GST) in a more streamlined manner. The HSN Code is part of the GST scheme and is implemented across several nations that have implemented GST as part of law.

The HSN Code classification is mainly for taxation purposes i.e. it spots the tax rate applicable on a product supplied across a country. The GST HSN Code is further employed to determine export operations and trading of an item within a nation’s boundaries.

India had already employed the HSN Code system, thanks to the Central Customs and Excise Departments, but after the implementation of the Goods and Service Tax Act, the HSN Code has been used as a detailed classification. This includes the addition of two digits to the standard six-digit structure, which gives a more precise code to a particular good.

Advantages of adopting HSN Codes

  • India is considered on par with the global standards in terms of international laws, thanks to its adoption of HSN Codes
  • WIth this law, India is expected to be accepted by global competition
  • HSN Codes will enable the government take economic decisions at the macro level, while keeping in mind economic trade
  • Usage of correct codes simplify trade, thereby reducing any chance of error.

Breaking down HSN Codes

HSN comprises 21 sections, with 99 Chapters, 1,244 headings, and 5,224 subheadings. The 21 sections are divided into the 99 chapters, and each chapter is divided into the 1,244 headings, which are further divided into 5,244 subheadings.

Section and Chapter denote the categories of products or goods while Heading and Subheading denote the products in detail.

In India, it is mandatory for a product to have an eight-digit HSN Code in case of an export and import under the GST regime.

GST-registered entities are required to mandatorily file returns every month, quarter, and year, depending on the type of business and the business turnover. With the HSN Code, taxpayers will now find it easy to upload the data, as opposed to manually uploading hte description of the supplies and commodities.

Besides this, every supplier of goods and services must issue an invoice mentioning the HSN code and SAC for the commodities and services rendered. It is important for every dealer to be aware of the structure.

With Vakilsearch’s HSN code finder you can find the code of your product easily. All you need to do is just enter the name of the product and click “Search”. The HSN code list with GST rate, Description of the product and the related codes will be displayed.