What is HSN Code?
The term “Harmonized System of Nomenclature” is commonly known as HSN. The purpose of introducing this system was to introduce the systematic classification of all the goods throughout the world. The Harmonized System of Nomenclature or HSN is a six - digit uniform code which classifies more than 5000 products and this is also accepted worldwide. The World Customs Organisation (WCO) developed the HSN and in year 1988 it came into effect.
How does HSN code work?
They have around 5000 commodity groups where each of them have their own six - digit code which helps in identification. They are arranged in a structure which is both legal as well as logical. The HSN Code is also supported by well - defined rules so that they are able to achieve a form of uniform classification.
Why is HSN important?
The reason why HSN was introduced so that there can be a classified group of goods from all over the world which is maintained in a systematic as well as logical manner. This also helps in bringing these goods under a uniform classification as well as facilitating in International Trade.
HSN Worldwide
There are three major reasons as to why more than 200 countries as well as economies use the HSN System. These reason are:
· It helps in a uniform classification.
· The Custom Tariffs are based on them.
· It helps in the collection of the international trade statistics.
In the international trade, around 98% of the merchandise are classifies on the basis of HSN.
The number of Harmonized System of Nomenclature for each of the commodities are accepted by almost all the countries. The number set as the HSN Code is usually the same for mostly all the goods. Although there are certain countries that use different HSN code as it depends upon the nature of the respective good.
HSN in India
Since the year 1971 India has been a member of the World Custom Organisation (WCO). Initially the HSN Code was a six - digit number which was used to classify the commodities for the Customs and Central Excise. Now the Customs and Central Excise has decided to add two digits to the HSN Code, the purpose of this being to bring more precision with the eight - digit classification code.
Understanding the HSN Code
The structure of HSN contains a total of 21 sections which has 99 chapters. It further contains about 1244 headings as well as 5224 subheadings.
· The format of the HSN Code that every section is first divided into individual chapters. Further these chapters are divided in to heading and those headings are then divided into subheadings.
· The titles of the sections and chapters helps in describing the broad categories of the goods. Whereas the headings and the subheadings gives a detailed explanation about the product.
For instance,
Ø Handkerchiefs made of Textile matters 62.13.90
o The first two digits i.e. 62 in the code represents the chapter number. The chapter number is for the articles of “Apparel and clothing accessories, not knitted or crocheted”.
o The next two digits i.e. 13 in the code represents the heading number used for handkerchiefs.
o The last two digits i.e. 90 used in the code represents the product code for handkerchiefs which are made of other textile materials.
As mentioned earlier, India uses two more digits for a deeper classification of products. So for all thehandkerchiefs which are made from a man - made fibre, the HSN Code is set as 62.13.90.10.
In case the handkerchiefs use either silk or any waste from silk in its manufacturing then the HSN Code is set as 62.13.90.90.
Services Accounting Code (SAC) in GST
Not only goods but even services are classified in a uniform manner for the purpose of recognition, taxation as well as measurement. The term used to describe the codes for services is Services Accounting Code or the SAC.
For instance,
Ø Legal documentation and certification services concerning patents, copyrights and other intellectual property rights, 998213
o The first two digits i.e. 99 is the same which is used for all the services.
o The next two digits i.e. 82 is used to represent the main nature of the service offered, for example in this case the main service is legal.
o The last two digits i.e. 13 is used to represent the nature of service in detail, for example in this case it is the documentation for patents.
HSN in GST
The HSN code that have to be declared
Turnover
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Number of digits of HSN that has to be declared
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Upto 1.5 crore
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0
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1.5 crore- 5 crore
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2
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More than 5 crore
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4
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It is important that all the taxpayer declare the HSN Codes in each of their tax invoices under the GST.
The number of digits that are to be used in the HSN Code is decided on the basis of the turnover of the previous year.
If an individual is involved in the import and export business, then it is mandatory for them to mention all 8 digits of the HSN Code.
Why is HSN important under GST?
The importance of the HSN Code under the GST is in order to make it more systematic as well as globally accepted. With the help of HSN Codes the need to upload the detailed description of the products will be completely eliminated. This will not only save time while filing the GST Returns but also make the procedure fairly easier since it is an automated procedure.
In case the turnover falls in the above slabs then the dealer or the service provider will have to provide HSN or SAC wise detailed summary of the sales made in this GSTR - 1.
HSN - wise summary of outward supplies
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Sections
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HSN Code List
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Section 1
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Live Animals and Animal Products
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Section 2
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Vegetable Products
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Section 3
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Animal or Vegetable Fats and Oils and their cleavage products, prepared edible fats, Animal or Vegetable waxes
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Section 4
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Prepared Foodstuffs, Beverages, Spirits and Vinegar, Tobacco and Manufactured Tobacco Substitutes
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Section 5
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Mineral Products
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Section 6
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Product of the chemicals or allied Industries
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Section 7
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Plastics and articles thereof, Rubber and articles thereof
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Section 8
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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 )
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Section 9
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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
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Section 10
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Pulp of wood or of other Fibrous Cellulosic Material, Recovered ( Waste and scrap ) paper or paperboard, paper and paperboard and articles thereof
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Section 11
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Textile and textile articles
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Section 12
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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
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Section 13
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Articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware
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Section 14
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Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, and articles thereof, Imitation Jewellery, Coins
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Section 15
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Base Metals and articles of Base Metal
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Section 16
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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
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Section 17
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Vehicles, Aircraft, Vessels and Associated Transport Equipment
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Section 18
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Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments, parts and accessories thereof
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Section 19
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Arms and ammunition, parts and accessories thereof
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Section 20
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Miscellaneous Manufactured Articles
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Section 21
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Works of art, Collectors' Pieces and antiques
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How can I find my product in HSN list and its relevant HSN Code?
If you want to find out the HSN Code as well as the SAC code of services, then we recommend you to visit our HS Calculator which is very handy for you to use.
What is UQC?
Unique Quantity Code in simple terms is just a unit of measurement for example 1 Kilogram of rice or 1 litre of milk, etc. and is usually referred to as UQC.
What is UQC in GST?
It is important that all the tax invoices or the credit notes or debit notes have the Unique Quantity Code (UQC) on them. This is a mandatory requirement as per the rules laid down under CGST.
For instance, 200 meter of fabric.
It is necessary that the tax payer is aware of the right HSN Code of the respective product so that the chances of making mistakes minimizes.