✓Minimal Documentation ✓Flexible Repayment ✓Collateral Free Loan | Apply for Business Loan Now! Check Eligibility

What is HSN Code and Its Full Form?

The HSN code’s full form is ‘Harmonized System of Nomenclature’. This system is employed across the world to identify traded commodities. 

 

It was developed by the World Customs Organization (WCO) and put into effect in 1988 as a convenient way to classify goods systematically. 

 

This uniform code comprises 6 digits that classify more than 5,000 products. What makes this system truly effective is that it is accepted widely across the world.

How Does the HSN Code Work?

HSN comprises more than 5,000 commodity groups. Each commodity is identified by a unique six-digit code that is arranged in a logical, structural manner. Every coding is supported by a well-defined rule that helps it achieve uniform classification.

Importance of HSN

The HSN code categorises a variety of commodities which aids parties involved in international trade to run the operations seamlessly. The HSN system has been adopted by over 200 nations because it serves the following purposes:

  • Uniformly classifies goods

  • Serves as a base for custom tariffs

  • Aids in a convenient collection of international trade statistics

The code remains standard for almost all goods, barring some nations where it may vary depending on the nature of the classified good(s).

HSN Worldwide

As mentioned above, more than 200 countries have adopted the HSN system. In fact, over 98% of the merchandise involved in international trade carries an HSN code. However, the HSN code may differ a little from country to country.

Significance of HSN in India

India has been an active member of the World Customs Organization since the year 1971. 

Hence, it uses the six-digit HSN code to categorise commodities. However, the Customs and Central Excise department uses an eight-digit HSN code. 

 

The additional digits were added to make the codes more precise and further aid in categorising the goods.

Understanding the HSN Code with Example

The HSN structure contains a total of 21 sections and 99 chapters. It also includes an additional 1,244 headings and 5,224 subheadings. 

 

Every section is divided into chapters, and every chapter is divided into headings. The headings are further divided into sub-headings. The sections and chapters include a broad category of goods, whereas the headings and subheadings depict the nature of the goods in detail.

 

Here is an illustration that will help you understand the structure and use of HSN code for a particular good, i.e., a handkerchief.

 

  • Chapter 61 – These two digits represent the chapter number for the article of apparel accessories

  • Heading 12 – These digits represent the heading number for handkerchiefs

  • Sub-heading 90 – The numbers here represent the product code for the handkerchief

  • Tariff item 11 – These digits denote the particular material used to make the handkerchief, like silk or man-made fibre

Thus, the HSN code of this product is 61.12.90.11.

Declaration of HSN Code for Goods and Services

All taxpayers were required to declare 6-digit codes of HSN in GST invoices by April 1, 2023. Moreover, if you are importing or exporting a commodity, all 8 digits of the HSN code must be declared in the tax invoice to ensure the GST invoice is valid. 

 

When declaring the HSN code, remember that you need to refer to the turnover for FY 2022-23 for reporting invoices in the same financial year. The following table presents the number of digits of HSN codes you need to declare for different types of invoices: 

Transaction Charges

Type of Invoice Document

Number of HSN Digits to be declared

 

Up to ₹5 Crores

 

Mandatory for B2B tax invoices

4

Optional for B2C tax invoices

4

More than ₹5 Crores

Mandatory for all invoices

6

HSN in GST

After the introduction of GST in 2017, the HSN code list was adopted to identify commodities under this new indirect tax regime as well. The following table shows the number of digits of the HSN code you are required to declare by March 31, 2023.

Transaction Charges

No. of digits of HSN to be declared

Up to ₹1.5 Crores

0

₹1.5 crore- ₹5 Crores

2

More than ₹5 Crores

4

Importance of HSN under GST

Now that you know the significance of the HSN code in India, it is time to understand the importance of HSN in GST invoices. The GST HSN Code makes the indirect tax system more globally accepted and relevant.

 

Most importantly, it eliminates the need to include a description of goods and helps save time when filing GST returns. Here is the summary of the common GST HSN Code List:

Sections

HSN Code List For

 

 

Section 1

  • Chapter 1- Animals
  • Chapter 2- Meat and edible offal
  • Chapter 3- Fish, molluscs, crustaceans, and other aquatic invertebrates
  • Chapter 4- Dairy produce, birds' eggs, honey and other edible products of animal origin that are not specified elsewhere
  • Chapter 5- Other products of animal origin that are not specified elsewhere

 

 

 

 

 

 

Section 2

  • Chapter 6- Live trees and plants, bulbs, roots, etc., cut flowers and ornamental foliage
  • Chapter 7- Edible vegetables, certain roots and tubers
  • Chapter 8- Edible fruit and nuts, the peel of citrus fruits or melons
  • Chapter 9- Tea, coffee, mate and spices
  • Chapter 10- Cereals
  • Chapter 11- Milling products, malt, wheat gluten, starches, and inulin
  • Chapter 12- Oil seeds and oleaginous fruits, grains, straw and fodder, seeds and fruit, and industrial or medicinal plants
  • Chapter 13- Lac, gum, resin, and other saps and extracts
  • Chapter 14- Vegetable plaiting materials, and vegetable products that are not specified elsewhere

Section 3

Chapter 15- Animal or Vegetable Fats and Oils and their cleavage products, prepared edible fats; Animal or Vegetable waxes

 

 

 

 

 

Section 4

  • Chapter 16- Preparation of meat, fish or crustaceans, molluscs, or any other aquatic invertebrates
  • Chapter 17- Sugar and sugar confectionery
  • Chapter 18- Cocoa and cocoa preparations
  • Chapter 19- Preparations of cereals, starch, flour, milk, and pastry products
  • Chapter 20- Preparation of vegetables, fruits, nuts, or plant parts
  • Chapter 21- Miscellaneous edible preparations
  • Chapter 22- Beverages, vinegar, and spirits
  • Chapter 23- Residue and food waste, prepared animal fodder
  • Chapter 24- Tobacco and tobacco substitutes that are manufactured

 

Section 5

  • Chapter 25- Salt, earths and stones, sulphur, plastering material, lime, and cement
  • Chapter 26- Ores, slag, and ash
  • Chapter 27- Mineral fuel, mineral oils and products of their distillation, mineral waxes, and bituminous substances 

 

 

 

 

 

 

 

 

 

Section 6

  • Chapter 28- Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals, radioactive elements, or isotopes
  • Chapter 29- Organic chemicals
  • Chapter 30- Pharmaceutical products
  • Chapter 31- Fertilisers
  • Chapter 32- Tanning or dyeing extracts, tannins and their derivatives, dyes, pigments, and other colouring matter, varnishes and paints, inks, putty and other mastics
  • Chapter 33- Essential oils and resinoids, cosmetic or toilet preparations, perfumery
  • Chapter 34- Soap, washing preparations, organic surface-active agents, lubricating preparations, prepared waxes, artificial waxes, polishing or scouring preparations, candles and similar items, modelling pastes, dental preparations and dental waxes with a basis of plaster
  • Chapter 35- Albuminoidal substances, glues, enzymes, and modified starches
  • Chapter 36- Explosives, pyrotechnic products, pyrophoric alloys, certain combustible preparations, and matches
  • Chapter 37- Photographic or cinematographic goods
  • Chapter 38- Miscellaneous chemical products
Section 7
  • Chapter 39- Plastics and plastic articles
  • Chapter 40- Rubber and rubber articles

 

Section 8

  • Chapter 41- Raw hides and skins (other than furskins) and leather
  • Chapter 42- Articles made of leather, travel goods, handbags and similar containers, saddlery and harnesses, articles made of animal gut (other than silkworm gut)
  • Chapter 43- Furskins and artificial fur and articles thereof
Section 9
  • Chapter 44- Wood and wooden articles, wood charcoal
  • Chapter 45- Cork and articles of cork
  • Chapter 46- Manufactures of straw, esparto or other plaiting materials, basket ware and wickerwork

 

Section 10

  • Chapter 47- Pulp of wood or other fibrous cellulosic material, recovered paper or paperboard (waste and scrap)
  • Chapter 48- Paper and paperboard, articles made of paper pulp, or articles made of paper or paperboard.
  • Chapter 49- Printed books, pictures, newspapers, and other products of the printing industry, typescripts, manuscripts, and plans

 

 

 

 

 

 

 

 

 

Section 11

  • Chapter 50- Silk
  • Chapter 51- Wool, fine or coarse animal hair, horse hair yarn and other woven fabrics
  • Chapter 52- Cotton
  • Chapter 53- Other vegetable textile fibres, paper yarn and woven fabrics made of paper yarn
  • Chapter 54- Man-made filaments
  • Chapter 55- Man-made staple fibres
  • Chapter 56- Wadding, felt and nonwovens, twine, cordage, special yarns, ropes, and cables and articles thereof
  • Chapter 57- Carpets and textile floor coverings
  • Chapter 58- Special woven fabrics, lace tapestries, tufted textile fabrics, trimmings, and embroidery
  • Chapter 59- Impregnated, covered, coated, or laminated textile fabrics, textile articles made for industrial use.
  • Chapter 60- Knitted or crocheted fabrics
  • Chapter 61- Articles of apparel and clothing accessories that are knitted or crocheted
  • Chapter 62- Articles of apparel and clothing accessories that are not knitted or crocheted
  • Chapter 63- Other made up textile articles, sets, worn clothing and textile articles, and rags

 

Section 12

  • Chapter 64- Footwear, gaiters, etc., and the parts of such articles
  • Chapter 65- Headgear and parts thereof
  • Chapter 66- Umbrellas and sun umbrellas, walking sticks, seat sticks, riding crops and parts thereof, and whips
  • Chapter 67- Prepared feathers and down and articles made thereof, artificial flowers, and articles made of human hair
Section 13
  • Chapter 68- Articles made of stone, plaster, cement, asbestos, mica or similar materials
  • Chapter 69- Ceramic products
  • Chapter 70- Glass and glassware

Section 14

Chapter 71- Natural or cultured pearls, precious metals, Precious or semi-precious stones; Metal clad with precious metal, and articles thereof; Imitation Jewellery, Coins

 

 

 

 

 

Section 15

  • Chapter 72- Iron and steel
  • Chapter 73- Articles made 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, and articles thereof
  • Chapter 82- Tools, implements, spoons and forks, cutlery, of base metal, and parts thereof
  • Chapter 83- Miscellaneous articles made of base metal

 

Section 16

  • Chapter 84- Nuclear reactors, machinery and mechanical appliances, boilers, and parts thereof
  • Chapter 85- Electrical machinery and equipment and parts thereof, sound reproducers and recorders, television image and sound reproducers and recorders, and parts and accessories of such articles

 

 

Section 17

  • Chapter 86- Tramway or railway locomotives, tramway or railway track fixtures and fittings and parts thereof, rolling stock and parts thereof, mechanical (including electro-mechanical) traffic signalling equipment of all kinds
  • Chapter 87- Vehicles other than tramway or railway rolling stock, and parts and accessories thereof
  • Chapter 88- Aircraft, spacecrafts, and parts thereof
  • Chapter 89- Ships, boats and floating structures

 

Section 18

  • Chapter 90- Optical, photographic, cinematographic, checking, measuring, precision, medical or surgical instruments and apparatus, parts and accessories thereof
  • Chapter 91- Clocks and watches and parts thereof
  • Chapter 92- Musical instruments, and parts and accessories of such articles

Section 19

Chapter 93- Arms and ammunition, parts and accessories thereof

 

 

Section 20

  • Chapter 94- Furniture, mattresses, mattress supports, bedding, cushions and similar stuffed furnishing, lamps and lighting fittings, which are not elsewhere specified or included, illuminated signs and 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
  • Chapter 97- Works of art, collectors' pieces and antiques
  • Chapter 98- Project imports, laboratory chemicals, personal imports by air or post, passenger's baggage, ship stores
  • Chapter 99- Services

Understanding the HSN code is important when filing your GST returns. You can run a HSN code search on the GST portal by chapter or description of goods or services. You can also download the HSN directory from the ‘Search HSN Code’ page on the official website.

 

This process will help you know the code for your product so that you can eliminate any chance of errors. It will also come to your aid during your GST filing procedure and ensure a simplified, hassle-free process. 

Services Accounting Code (SAC) in GST

As its name suggests, GST is a tax applicable to both goods and services. Just like GST HSN code, Services Accounting Code (SAC) classifies services for their easy identification and taxation. 

 

The Services Accounting Code is part of the HSN Code as Chapter 99 of the last section. For instance, the SAC for ‘Legal documentation and certification services concerning patents, copyrights and other intellectual property rights’ is 998213. 

 

Here,

  • The first two digits refer to the chapter number in GST HSN Code, which is 99 for all services

  • The next set of two digits represent the nature of services (legal services in the example cited above)

  • The last couple of digits shows the detailed nature of the services (legal documentation for patents in the above example)

FAQs About HSN Code

Is the HSN code a 6-digit or 8-digit number?

While the HSN code developed by the World Customs Organisation has 6 digits, the Indian government uses an 8-digit code to identify different commodities.

What is the HSN code for 18% GST?

Commodities that fall under Schedule III of the HSN code attract a GST rate of 18%. 

Which commodities are exempt from GST?

Many commodities with HSN codes are exempt from GST. For instance, all entries under Section 1 are exempt from GST except for live horses.

Is the HSN code mandatory for GST?

Yes, it is mandatory for taxpayers to declare 4- or 6-digit HSN codes in table 12 when filing GSTR-1.

Is the HSN code mandatory on an invoice?

Yes, as per the GST rules, it is mandatory for taxpayers to declare a 4-digit GST HSN code on B2B invoices. This condition applies only when your average annual turnover (AATO) in the previous year is up to ₹5 Crores.

 For B2C invoices, it is optional to have an HSN code. The declaration of a 6-digit HSN code for all invoices is a must if your AATO in the previous year exceeds ₹5 Crores.

What happens if the HSN code is wrong?

On mentioning the wrong GST HSN code, a penalty of ₹50,000 will be levied. 

 

Home
active_tab
Loan Offer
active_tab
Download App
active_tab
CIBIL Score
active_tab