GST India Forum – Goods and Services Tax (GST) in India Forums Discussion How will the goods and services be classified under GST

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  • Priya MadrechaPriya Madrecha
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    #638 |

    I have heard that under GST regime, goods will be classified as per HSN. Can you explain how it will work and what exactly is HSN.

    If Goods are classified as per HSN, what about services. How will services be classified in GST?

    Adarsh MadrechaAdarsh Madrecha
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    HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Services will be, classified as per the Services Accounting Code (SAC)

    Taxpayers whose turnover is above Rs. 1.5 crores (for the previous year) 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.

    Related Questions and their answers

    Q: Whether description of each item in the invoice will have to be uploaded?
    Ans. No. In fact description will not have to be uploaded. Only HSN code in respect of supply of goods and Accounting code in respect of supply of services will have to be fed. The minimum number of digits that the filer will have to upload would depend on his turnover in the last year.

    Q : Will GSTN generate a unique identification for each invoice line in GSTN system?
    Ans. No, GSTN will not generate any new identification. The combination of Supplier’s GSTIN, Invoice no and Financial year with HSN/SAC Code will make each line unique.

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    What is HSN code?

    Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardised system of names and numbers to classify traded products. These codes are basically used to fix a rate of tax on various products at the time of export and import. In the Indian context, under GST regime, HSN codes will be used to classify goods in an invoice to make taxation system uniform. Under GST supply invoices will be made by capturing HSN codes in case of goods and service accounting codes in case of services.

    The concept of HSN codes was invented outside India and same is used by various member countries. The above parameters with respect to HSN code for goods and Accounting Code for services will apply for submitting the information in return relating to relevant invoice level information for B2B supplies (both intra-state and interstate) and inter-state B2C supplies (where taxable value per invoice is more than Rs. 2.5 lakhs).

    HSN code of 4 digits for goods:

    Though internationally HSN code is of 6-8 digits but in GST context HSN code of 4 digits will be mandatory for taxpayers having turnover more than 5 crores. Turnover will be taken on self-declaration basis for IST year and afterwards turnover of the previous year shall be used. In return form rate of tax shall be auto-populated based on the HSN codes used in furnishing invoice level purchase or sale information. After completing the first year under GST the turnover for the previous year will be considered as a yardstick for using HSN codes of 4 digits.

    HSN code of 2 digits for goods:

    For taxpayers with turnover between Rs 1.5 Crores and Rs 5 Crores in the preceding financial year, HSN codes need to be specified only at 2-digit chapter level. HSN code at 2 digits will be little easy for taxpayers and make GST an international compatible tax.

    HSN codes in case of Export and Import:

    HSN codes at 08 digits will be mandatory in case of export and imports. The GST law has to be compatible with international standards.

    Benefits of HSN codes:

    In case goods and services are identified through their unique codes, the chances of misinterpretation are very low. Again the taxpayers are not required to submit a description of goods and services in return as the same is to be obtained from invoices which are made on the basis of HSN codes and accounting code.

    For other Composition scheme and small dealers:

    Though limits have been fixed for mandatory use of HSN and service accounting code but any taxpayer can use these optionally if he desires. The small classes of dealers who have opted composition scheme are even not required to use HSN codes of 2 digits.

    Way ahead:

    For all B2B transactions (Inter-state and intra-state) invoice level specified details will be uploaded i.e. every invoice issued by the taxpayers will form part of GST return. For all B2C transactions, it will be mandatory to upload invoice wise information if it exceeds 2.5 lac

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    Adarsh MadrechaAdarsh Madrecha
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    NumberDescription
    Section 01HS Codes List of (Chapter 1 – 5 ) – Section I-Live Animals; Animal Products
    Chapter 01Live animals
    Chapter 02Meat and edible meat offal
    Chapter 03Fish and crustaceans, molluscs and other aquatic invertebrates.
    Chapter 04Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included.
    Chapter 05Products of animal origin, not elsewhere specified or included.
    Section 02HS Codes List of (Chapter 6-14 ) – Section II-Vegetable Products
    Chapter 06Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage
    Chapter 07Edible vegetables and certain roots and tubers
    Chapter 08Edible fruit and nuts; peel of citrus fruits or melons.
    Chapter 09Coffee, tea, mate and spices
    Chapter 10Cereals
    Chapter 11Products of the milling industry; malt; starches; inulin; wheat gluten.
    Chapter 12Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder.
    Chapter 13Lac; gums, resins and other vegetable saps and extracts.
    Chapter 14Vegetable plaiting materials; vegetable products not elsewhere specified or included.
    Section 03HS Codes List of (Chapter 15 ) – Section III-Animal or Vegetable Fats and Oils and their cleavage Products; Prepared Edible fats; animal or Vegetable waxes
    Chapter 15Animal or vegetable fats and oil and their cleavage products; prepared edible fats; animal or vegetable waxes.
    Section 04HS Codes List of (Chapter 16 -24 ) – Section IV-Prepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco and Manufactured Tabacco substitutes
    Chapter 16Preparation of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates.
    Chapter 17Sugars and sugar confectionery.
    Chapter 18Cocoa and cocoa preparations
    Chapter 19Preparations of cereals, flour, starch or milk; pastry cooks’ products.
    Chapter 20Preparations of vegetables, fruit, nuts or other parts of plants.
    Chapter 21Miscellaneous edible preparations
    Chapter 22Beverages, spirits and vinegar.
    Chapter 23Residues and waste from the food industries; prepared animal fodder.
    Chapter 24Tobacco and manufactured tobacco substitutes.
    Section 05HS Codes List of (Chapter 25 -27 ) – Section V-Mineral Products
    Chapter 25Salt; sulphur, earths and stones; plastering materials, lime and cement
    Chapter 26Ores, slag and ash
    Chapter 27Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes.
    Section 06HS Codes List of (Chapter 28 -38 ) – Section VI-Products of the Chemicals or Allied Industries
    Chapter 28Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes
    Chapter 29Organic chemicals
    Chapter 30Pharmaceutical products
    Chapter 31Fertilizers
    Chapter 32Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter, paints and varnishes; putty and other mastics; inks.
    Chapter 33Essential oils and resinoids; perfumery, cosmetic or toilet preparations.
    Chapter 34Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, “dental waxes” and dental preparations with a basis
    Chapter 35Albuminoidal substances; modified starches; glues; enzymes.
    Chapter 36Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations.
    Chapter 37Photographic or cinematographic goods.
    Chapter 38Miscellaneous chemical products.
    Section 07HS Codes List of (Chapter 39 – 40 ) – Section VII-Plastics and Articles thereof; Rubber and Articles Thereof
    Chapter 39Plastics and articles thereof
    Chapter 40Rubber and articles thereof
    Section 08HS Codes List of (Chapter 41 – 43 ) – Section VIII-Raw Hides and Skins, Leather, Furskins and Articles thereof; saddlery and Harness; travel goods, Handbags and similar Containers; Articles of animal gut (other than silk-worm Gut)
    Chapter 41Raw hides and skins (other than furskins) and leather.
    Chapter 42Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut)
    Chapter 43Furskins and artificial fur, manufactures thereof
    Section 09HS Codes List of (Chapter 44 -46 ) – Section IX-Wood and Articles of Wood; Wood Charcoal; cork and articles or cork; Manufactures of Straw, of Esparto or of other Plaiting Materials; Basketware and Wickerwork
    Chapter 44Wood and Articles of wood; wood charcoal
    Chapter 45Cork and articles of cork
    Chapter 46Manufactures of straw, of esparto or of other plaiting materials; basket-ware and wickerwork.
    Section 10HS Codes List of (Chapter 47 -49 ) – Section X-Pulp of wood or of other Fibrous Cellulosic Material; Recovered (Waste and Scrap) Paper or Paperboard; Paper And Paperboard and articles thereof
    Chapter 47Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard.
    Chapter 48Paper and paperboard; articles of paper pulp, of paper or of paperboard.
    Chapter 49Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans.
    Section 11HS Codes List of (Chapter 50 -63 ) – Section XI-Textile and Textile Articles
    Chapter 62Articles of apparel and clothing accessories, not knitted or crocheted.
    Chapter 50Silk
    Chapter 51Wool, fine or coarse animal hair; horse hair yarn and woven fabric
    Chapter 52Cotton
    Chapter 53Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn.
    Chapter 54Man-made filaments
    Chapter 55Man-made staple fibres.
    Chapter 56Wadding, felt and non-wovens; special yarns; twine, cordage, ropes and cables and articles thereof.
    Chapter 57Carpets and other textile floor coverings.
    Chapter 58Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery.
    Chapter 59Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use.
    Chapter 60Knitted or crocheted fabrics
    Chapter 61Articles of apparel and clothing accessories knitted or crocheted.
    Chapter 63Other made up textile articles; sets; worn clothing and worn textile articles; rags.
    Section 12HS Codes List of (Chapter 64 -67 ) – Section XII-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
    Chapter 64Footwear, gaiters and the like; parts of such articles.
    Chapter 65Headgear and parts thereof.
    Chapter 66Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof.
    Chapter 67Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair.
    Section 13HS Codes List of (Chapter 68 -70 ) – Section XIII-Articles of Stone, Plaster, Cement, Asbestos, Mica or similar Materials; Ceramic Products; Glass and Glassware
    Chapter 68Articles of stone, plaster, cement, asbestos, mica or similar materials.
    Chapter 69Ceramic products.
    Chapter 70Glass and glassware.
    Section 14HS Codes List of (Chapter 71 ) – Section XIV-Natural or Cultured Pearls, Precious or Semi-Precious Stones, Precious Metals, Metals clad with Precious Metal, and articles thereof; Imitation Jewellery; Coin
    Chapter 71Natural or cultured pearls, precious or semi-precious stones, preciousmetals, metals clad with precious metal and articles thereof; immitation jewellery; coin.
    Section 15HS Codes List of (Chapter 72 -83 ) – Section XV-Base Metals and Articles of Base Metal
    Chapter 72Iron and steel
    Chapter 73Articles of iron or steel
    Chapter 74Copper and articles thereof
    Chapter 75Nickel and articles thereof
    Chapter 76Aluminium and articles thereof
    Chapter 77(Reserved for possible future use)
    Chapter 78Lead and articles thereof
    Chapter 79Zinc and articles thereof
    Chapter 80Tin and articles thereof
    Chapter 81Other base metals; cermets; articles thereof
    Chapter 82Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal
    Chapter 83Miscellaneous articles of base metal
    Section 16HS Codes List of (Chapter 84 – 85 ) – Section XVI-Machinery and Mechanical Appliances; Electrical Equipment; Parts thereof; sound Recorders and Reproducers, Television Image and Sound Recorders and reproducers, Television Image and sound Recorders and Reproducers, and Parts and Accessories of such article
    Chapter 84Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof.
    Chapter 85Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.
    Section 17HS Codes List of (Chapter 86 – 89 ) – Section XVII-Vehicles, Aircraft, Vessels and Associated Transport Equipment
    Chapter 86Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signalling equipment of all kinds.
    Chapter 87Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof.
    Chapter 88Aircraft, spacecraft, and parts thereof.
    Chapter 89Ships, boats and floating structures
    Section 18HS Codes List of (Chapter 90 – 92 ) – Section XVIII-Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical Instruments and apparatus; clocks and watches; musical instruments; part and accessories thereof
    Chapter 90Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof.
    Chapter 91Clocks and watches and parts thereof.
    Chapter 92Musical instruments; parts and accessories of such articles.
    Section 19HS Codes List of (Chapter 93 ) – Section XIX-Arms and Ammunition; Parts and Accessories thereof
    Chapter 93Arms and ammunition; parts and accessories thereof.
    Section 20HS Codes List of (Chapter 94 – 96 ) – Section XX-Miscellaneous Manufactured Articles
    Chapter 94Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name-plates and the like; prefabricated buildings.
    Chapter 95Toys, games and sports requisites; parts and accessories thereof.
    Chapter 96Miscellaneous manufactured articles.
    Section 21HS Codes List of (Chapter 97 – 98 ) – Section XXI-Works of art, Collectors’ Pieces and Antiques
    Chapter 97Works of art, collectors’ pieces and antiques
    Chapter 98Project imports, Laboratory chemicals, passenger’s baggage, personal importation by air or post; ship stores.
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