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What is HSN Code? Use of HSN Code under GST

What is HSN Code? Use of HSN Code under GST

The full form of HSN code means Harmonized System Nomenclature. Harmonized System of Nomenclature” or simply “HSN” is a multipurpose international product nomenclature developed by the World Customs Organization (WCO) with the objective of classifying goods from all over the World in a systematic and logical manner.

It comprises about 5,000 commodity groups; each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.

The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international trade is classified in terms of the HS.

HSN code number is widely used in many countries to classify goods for taxation purpose, claiming benefits etc. Harmonized System of Nomenclature number for each commodity is accepted by most of the countries and the said HSN number remains same for almost all goods. However, HSN number used in some of the countries varies little, based on the nature of goods classified.

HSN in India:

In India, when implementing GST, all goods are classified based on HSN number for GST purpose. At present, HSN number is mainly used for classifying goods to compute Value Added Tax in India. The same classification code (HSN) is adopted for classifying Goods and Service Tax, GST.

India is all set to have its own Goods & Services Tax or GST, which applies to all goods and services alike. It shall subsume many indirect taxes and reduce the burden on the end consumer. India has already been using HSN system since 1986 in the Central Excise and Customs regime. It is a much more detailed classification that added another two digits to the 6-digit structure. Indian manufacturers under GST shall be required to follow a 3-tiered structure of HSN.

  • Those with a turnover of less than INR 1.5 Crores need not follow HSN

  • Those with a turnover exceeding INR 1.5 Crores but less than INR 5 Crores shall be using the 2 digit HSN codes

  • Those with a turnover exceeding INR 5 Crores shall be using the 4 digit HSN codes

  • Those dealers who are into imports or exports shall mandatorily follow the 8 digit HSN codes

Understanding the digits of HSN Code

The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 sub-headings. These 21 sections of HSN codes are sub classified in to 99 Chapters of HSN code. Each Chapter can be named as two digit HSN number. Again each two digit HSN number is sub classified to 4 digit HSN code. Based on such 4 digit HSN codes, the sub classification is done as 6 digit HSN code.

As per Harmonized System of Nomenclature accepted world wide, normally 6 digit HSN code is accepted worldwide. However, in most of the countries additional two digit HSN code is added at last part of such HSN code number to sub classify 6 digit HSN code number.


1) Is HSN Code is mandatory for all the dealers?

A: HSN codes shall not be used mandatorily in the following cases:

  • Dealers who have an annual turnover of less than INR 1.5 Crores

  • Dealers registered under the Composition Scheme of GST are exempted from the usage of HSN Codes

2) Why is it necessary to follow HSN Codes and SAC Codes?

A: HSN codes are internationally recognized system of codifying and classifying all the products in the World. It will make GST compliant with the international standards and ensure proper levy of taxes. HSN gives a systematic and logical way of classification, thereby reducing the chances of any misinterpretations. Further, a common structure enables governments of countries to collaborate data of purchases and sales of commodities and analyze the same. Post this analysis, they can decide on macro-economic policies relatable to important commodities.

3) Has the Government notified HSN Codes and Service Accounting Codes?

A: Yes. HSN Codes and SAC are available on the Ministry’s website. They are controlled by the ACES website, which was earlier used by the Central Board of Excise and Customs (CBEC) for its operations.

Here is a list of HSN Codes for Goods in pdf

Here is a list of GST HSN Code list in Excel Format Here are SAC Codes and Rates for Services.

4) How can I find the product in HSN list and its relevant HSN Code?

A: ACES or other websites have the functionality of searching your product or service and its relevant HSN / SAC Codes. ProfitBooks accounting software offers a way to allocate right HSN code to the product by using a database search.

5) Why are HSN Codes important at the time of filing GST returns?

A: Since 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. Dealers have to be careful in choosing the correct HSN/SAC code while migrating to GST or making a fresh registration.

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