What is HSN Code?
The Harmonized Commodity Description and Coding System generally referred to as “Harmonized System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It first came into effect in 1988.
How does HSN code work?
It has about 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure. It is supported by well-defined rules to achieve uniform classification.
Why is HSN important?
The main purpose of HSN is to classify goods from all over the World in a systematic and logical manner. This brings in a uniform classification of goods and facilitates international trade.
The HSN system is used by more than 200 countries and economies for reasons such as:
Over 98% of the merchandise in international trade is classified in terms of the HSN.
Understanding the HSN Code
The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.
For example: HSN code for gold jewellery (unstudded) is 7113 19 10. HSN code for gold jewellery (set with pearls) is 7113 19 20. HSN code for gold jewellery (set with diamonds) is 7113 19 30. HSN code for gold jewellery (set with other precious and semi-precious stones) is 7113 19 40. GST Rate is 3% for the same.
Services Accounting Code (SAC) in GST
Like goods, services are also classified uniformly for recognition, measurement and taxation. Codes for services are called Services Accounting Code or SAC.
For example: SAC code for various services provided by a Chartered Accountant is:
GST Rate is 18% for the same
HSN in 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%.
Every product under the Purview of GST has been given a unique HSN code, which is required to be quoted in GST Invoices and also a summary of the same needs to be shown in GSTR 1 on a monthly basis.
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.
HSN - wise summary of outward supplies
|Sections||HSN Code List for|
|Section 1||Live Animals, Animal Products|
|Section 2||Vegetable Products|
|Section 3||Animal or Vegetable Fats and Oils and their cleavage products, prepared edible fats, Animal or Vegetable waxes|
|Section 4||Prepared Foodstuffs, Beverages, Spirits and Vinegar, Tobacco and Manufactured Tobacco Substitutes|
|Section 5||Mineral Products|
|Section 6||Product of the chemicals or allied Industries|
|Section 7||Plastics and articles thereof, Rubber and articles thereof|
|Section 8||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)|
|Section 9||Wood and articles of wood, Wood charcoal, Cork and articles of cork, Manufacturers of straw, of Esparto or of other Plaiting Materials, Basketwork and Wickerwork|
|Section 10||Pulp of wood or of other Fibrous Cellulosic Material, Recovered (Waste and scrap) paper or paperboard, paper and paperboard and articles thereof|
|Section 11||Textile and textile articles|
|Section 12||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|
|Section 13||Articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware|
|Section 14||Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metals, and articles thereof, Imitation Jewellery, Coins|
|Section 15||Base Metals and articles of Base Metal|
|Section 16||Machinery and mechanical appliances, electrical equipment, parts thereof, sound recorders and reproducers, television image and souch recorders and reproducers, and Parts and Accessories of such article|
|Section 17||Vehicles, Aircraft, Vessels and Associated Transport Equipment|
|Section 18||Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments, parts and accessories thereof|
|Section 19||Arms and ammunition, parts and accessories thereof|
|Section 20||Miscellaneous Manufactured Articles|
|Section 21||Works of art, Collectors' Pieces and antiques|
What is SAC?
Similar to HSN,India also adopted SAC. SAC(Services Accounting Code) is a unified code for recognition, measurement and taxation for services.SAC has been in existence from the previous regime itself, and have been defined for each type of service by the government for the proper levy of Service Tax. The same code is expected to continue in the GST era.
What is the 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.
How to search HSN?
First narrow down to Chapter, then Section. Then select a HSN code which best describes your commodity or alternatively just write down the name of the Good/Service you are dealing with and the HSN/SAC Lookup automatically reflects the HSN/SAC code as well as the latest GST Rate applicable.
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 emailing them and also call them at email@example.com | +91-124-4688999 / +91-120-4888999.
To understand more about possible GST frauds and to learn in detail how to verify if a business is GST registered, subscribe to our knowlegde center here. If you are looking for a solution to help you with your GST return filing write to us at firstname.lastname@example.org.