HSN
The Harmonized Commodity Description and Coding System normally refer to “Harmonized System of Nomenclature” or just “HSN”. It is a multipurpose international product nomenclature established by the World Customs Organization (WCO). It first came into use in 1988.
How does HSN code work?
It has up to 5,000 commodity groups, each identified by a six-digit code, arranged in a legal as well as logical structure. It is supported by a set of well-defined rules to achieve uniform classification.
Why is HSN important?
The key purpose of HSN is to classify goods from all over the World in a organized and logical manner. This brings in a consistent classification of goods and facilitates worldwide trade.
HSN Worldwide
The HSN system is utilised by more than 200 countries and economies for reasons such as follows:
- Uniform classification,
- Base for their Customs tariffs,
- compilation of international trade statistics
More than 98% of the merchandise in global trade is classified in terms of the HSN.
Harmonized System of Nomenclature (HSN) number for every commodity is accepted by the majority of the countries. The HSN number remains same for almost all goods. However, HSN number used in some of the countries differs little, based on nature of goods classified.
HSN in India
India is a member of the World Customs Organization (WCO) ever since 1971. It was originally utilising 6-digit HSN codes to classify commodities for the purpose of Customs and Central Excise. Afterwards Customs and Central Excise added two more digits to make the codes more precise, resultant in an 8 digit classification.
Understanding the HSN Code
The HSN constitution contains 21 sections, with about 99 Chapters, about 1,244 headings, and 5,224 subheadings.
- Every Section is divided into Chapters. Each Chapter is further divided into Headings. every Heading is divided into Sub Headings.
- Section and Chapter titles explain broad categories of goods, while headings and subheadings explain products in detail.
India has 2 more digits for a deeper categorization.
Services Accounting Code (SAC) in GST
Like goods, services are as well classified uniformly for acknowledgment, measurement and taxation. Codes for services are known as Services Accounting Code or SAC.
For example:
Legal documents and certification services relating to patents, copyrights and other intellectual property rights– 998213
- The first two digits are similar for all services i.e. 99
- The next two digits (82) stand for the major nature of service, in this case, legal services
- The last two digits (13) symbolize detailed nature of service, i.e., legal documentation for patents etc.
HSN in GST
HSN codes to be stated
| Turnover | No. of digits of HSN to be stated |
| Up to 1.5 crore | 0 |
| 1.5 crore- 5 crore | 2 |
| More than 5 crore | 4 |
- These HSN codes must be acknowledged in every tax invoice issued by the taxpayer under GST.
- The turnover for preceding year will be considered as a basis to find out number of HSN digits which is to be used.
All 8 digits of HSN code is compulsory in case of export and imports under the GST.
Why is HSN important under GST?
The reason of HSN codes is to make GST organized and globally accepted.
HSN codes will take away the need to upload the detailed description of the goods. This will save time and make filing simplified since GST returns are automated.
A dealer or a service provider should provide HSN/SAC wise synopsis of sales in his GSTR-1 if his turnover falls in above slabs.
HSN – wise synopsis of outward supplies
| Sections | HSN Code List for |
|---|---|
| Section 1 | Live Animals & Animal Products |
| Section 2 | Vegetable Products |
| Section 3 | Animal or Vegetable Fats & Oils & their cleavage products, equipped edible fats, Animal or Vegetable waxes |
| Section 4 | Prepared Foodstuffs, Beverages, Spirits & Vinegar, Tobacco & Manufactured Tobacco Substitutes |
| Section 5 | Mineral Products |
| Section 6 | produce of the chemicals or allied Industries |
| Section 7 | Plastics & articles thereof, Rubber & articles thereof |
| Section 8 | Raw hides & skins, Leather, Furskins & articles thereof, saddlery & harness, travel goods, handbags & similar containers, articles of animal gut ( other than silk-worm gut ) |
| Section 9 | Wood & articles of wood, Wood charcoal, Cork & articles of cork, Manufacturers of straw, of Esparto or of other Plaiting Materials, Basketwork & Wickerwork |
| Section 10 | Pulp of wood or of other Fibrous Cellulosic Material, Recovered ( Waste & scrap ) paper or paperboard, paper & paperboard & articles thereof |
| Section 11 | Textile & textile articles |
| Section 12 | Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, seat-sticks, whips, riding-crops & parts thereof, Prepared feathers & articles made therewith, Artificial flowers, Articles of human hair |
| Section 13 | Articles of stone, plaster, cement, asbestos, mica, or alike materials, ceramic products, glass & glassware |
| Section 14 | Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, & articles thereof, Imitation Jewellery, Coins |
| Section 15 | Base Metals & article of Base Metal |
| Section 16 | Machinery & mechanical appliances, electrical equipment, parts thereof, sound recorders & reproducers, television image & souch recorders & reproducers, & Parts & Accessories of such article |
| Section 17 | Vehicles, Aircraft, Vessels & connected Transport Equipment |
| Section 18 | Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments & apparatus, clocks & watches, musical instruments, parts & accessories thereof |
| Section 19 | Arms & ammunition, parts & accessories thereof |
| Section 20 | Miscellaneous Manufactured Articles |
| Section 21 | Works of art, Collectors’ Pieces & antiques |
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