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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?
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.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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Number Description Section 01 HS Codes List of (Chapter 1 – 5 ) – Section I-Live Animals; Animal Products Chapter 01 Live animals Chapter 02 Meat and edible meat offal Chapter 03 Fish and crustaceans, molluscs and other aquatic invertebrates. Chapter 04 Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included. Chapter 05 Products of animal origin, not elsewhere specified or included. Section 02 HS Codes List of (Chapter 6-14 ) – Section II-Vegetable Products Chapter 06 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage Chapter 07 Edible vegetables and certain roots and tubers Chapter 08 Edible fruit and nuts; peel of citrus fruits or melons. Chapter 09 Coffee, tea, mate and spices Chapter 10 Cereals Chapter 11 Products of the milling industry; malt; starches; inulin; wheat gluten. Chapter 12 Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder. Chapter 13 Lac; gums, resins and other vegetable saps and extracts. Chapter 14 Vegetable plaiting materials; vegetable products not elsewhere specified or included. Section 03 HS 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 15 Animal or vegetable fats and oil and their cleavage products; prepared edible fats; animal or vegetable waxes. Section 04 HS Codes List of (Chapter 16 -24 ) – Section IV-Prepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco and Manufactured Tabacco substitutes Chapter 16 Preparation of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates. Chapter 17 Sugars and sugar confectionery. Chapter 18 Cocoa and cocoa preparations Chapter 19 Preparations of cereals, flour, starch or milk; pastry cooks’ products. Chapter 20 Preparations of vegetables, fruit, nuts or other parts of plants. Chapter 21 Miscellaneous edible preparations Chapter 22 Beverages, spirits and vinegar. Chapter 23 Residues and waste from the food industries; prepared animal fodder. Chapter 24 Tobacco and manufactured tobacco substitutes. Section 05 HS Codes List of (Chapter 25 -27 ) – Section V-Mineral Products Chapter 25 Salt; sulphur, earths and stones; plastering materials, lime and cement Chapter 26 Ores, slag and ash Chapter 27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes. Section 06 HS Codes List of (Chapter 28 -38 ) – Section VI-Products of the Chemicals or Allied Industries Chapter 28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes Chapter 29 Organic chemicals Chapter 30 Pharmaceutical products Chapter 31 Fertilizers Chapter 32 Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter, paints and varnishes; putty and other mastics; inks. Chapter 33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations. Chapter 34 Soap, 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 35 Albuminoidal substances; modified starches; glues; enzymes. Chapter 36 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations. Chapter 37 Photographic or cinematographic goods. Chapter 38 Miscellaneous chemical products. Section 07 HS Codes List of (Chapter 39 – 40 ) – Section VII-Plastics and Articles thereof; Rubber and Articles Thereof Chapter 39 Plastics and articles thereof Chapter 40 Rubber and articles thereof Section 08 HS 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 41 Raw hides and skins (other than furskins) and leather. Chapter 42 Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) Chapter 43 Furskins and artificial fur, manufactures thereof Section 09 HS 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 44 Wood and Articles of wood; wood charcoal Chapter 45 Cork and articles of cork Chapter 46 Manufactures of straw, of esparto or of other plaiting materials; basket-ware and wickerwork. Section 10 HS 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 47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard. Chapter 48 Paper and paperboard; articles of paper pulp, of paper or of paperboard. Chapter 49 Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans. Section 11 HS Codes List of (Chapter 50 -63 ) – Section XI-Textile and Textile Articles Chapter 62 Articles of apparel and clothing accessories, not knitted or crocheted. Chapter 50 Silk Chapter 51 Wool, fine or coarse animal hair; horse hair yarn and woven fabric Chapter 52 Cotton Chapter 53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn. Chapter 54 Man-made filaments Chapter 55 Man-made staple fibres. Chapter 56 Wadding, felt and non-wovens; special yarns; twine, cordage, ropes and cables and articles thereof. Chapter 57 Carpets and other textile floor coverings. Chapter 58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery. Chapter 59 Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use. Chapter 60 Knitted or crocheted fabrics Chapter 61 Articles of apparel and clothing accessories knitted or crocheted. Chapter 63 Other made up textile articles; sets; worn clothing and worn textile articles; rags. Section 12 HS 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 64 Footwear, gaiters and the like; parts of such articles. Chapter 65 Headgear and parts thereof. Chapter 66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof. Chapter 67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair. Section 13 HS Codes List of (Chapter 68 -70 ) – Section XIII-Articles of Stone, Plaster, Cement, Asbestos, Mica or similar Materials; Ceramic Products; Glass and Glassware Chapter 68 Articles of stone, plaster, cement, asbestos, mica or similar materials. Chapter 69 Ceramic products. Chapter 70 Glass and glassware. Section 14 HS 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 71 Natural or cultured pearls, precious or semi-precious stones, preciousmetals, metals clad with precious metal and articles thereof; immitation jewellery; coin. Section 15 HS Codes List of (Chapter 72 -83 ) – Section XV-Base Metals and Articles of Base Metal Chapter 72 Iron and steel Chapter 73 Articles of iron or steel Chapter 74 Copper and articles thereof Chapter 75 Nickel and articles thereof Chapter 76 Aluminium and articles thereof Chapter 77 (Reserved for possible future use) Chapter 78 Lead and articles thereof Chapter 79 Zinc and articles thereof Chapter 80 Tin and articles thereof Chapter 81 Other base metals; cermets; articles thereof Chapter 82 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal Chapter 83 Miscellaneous articles of base metal Section 16 HS 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 84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof. 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. Section 17 HS Codes List of (Chapter 86 – 89 ) – Section XVII-Vehicles, Aircraft, Vessels and Associated Transport Equipment Chapter 86 Railway 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 87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof. Chapter 88 Aircraft, spacecraft, and parts thereof. Chapter 89 Ships, boats and floating structures Section 18 HS 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 90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof. Chapter 91 Clocks and watches and parts thereof. Chapter 92 Musical instruments; parts and accessories of such articles. Section 19 HS Codes List of (Chapter 93 ) – Section XIX-Arms and Ammunition; Parts and Accessories thereof Chapter 93 Arms and ammunition; parts and accessories thereof. Section 20 HS Codes List of (Chapter 94 – 96 ) – Section XX-Miscellaneous Manufactured Articles Chapter 94 Furniture; 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 95 Toys, games and sports requisites; parts and accessories thereof. Chapter 96 Miscellaneous manufactured articles. Section 21 HS Codes List of (Chapter 97 – 98 ) – Section XXI-Works of art, Collectors’ Pieces and Antiques Chapter 97 Works of art, collectors’ pieces and antiques Chapter 98 Project imports, Laboratory chemicals, passenger’s baggage, personal importation by air or post; ship stores. 1 user thanked author for this post.
what will the HSN code for manufacturing of sheet metal parts/auto parts of sheet metal company having turnover around 10 crore p.a. if a company selling 300-400 components according to old excise tariff, they need to change all components codes according to new.
HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime.
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).
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