Table of Contents
What Is HSN Code?
Wondering what is the HSN full form in GST? The HSN code stands for Harmonized System Nomenclature. It’s a globally used 6-digit code that provides a standardized system of names and numbers to classify traded products. Think of it as a universal product ID for international trade.
This code simplifies the taxation process within the goods and services tax framework by categorising goods under a single umbrella.
HSN Code in India
In India, the HSN Code comprises 8-digit codes (6 digits globally). It is a vital classification system for goods implemented under the GST regime, streamlining taxation and facilitating international trade by providing a uniform code for products. They are crucial for businesses and international trade.
HSN Code Example and Format
Globally, the HSN code is a 6-digit code. However, in India, this system extends to 8 digits. It allows for more specific categorisation. The first two digits denote the chapter, the next two the heading, the following two the sub-heading, and the final two represent the specific tariff item.
Example
A common product like ‘Sugar Cubes’ falls under the HSN code 17019990. Here, 17 is the chapter for sugars and sugar confectionery: 01 indicates the heading for cane or beet sugar, 99 specifies the sub-heading for refined sugar, and 90 denotes the tariff item for other forms not elsewhere specified or included.
What is the Importance of the HSN Code?
1. Systematic Classification
This system provides classification for more than 5,000 commodity groups. Each group is systematically organised with a legal and logical structure complemented by clearly outlined rules to ensure consistent categorisation.
2. Cross-Border Trade Facilitation
These codes are integral to international trade. They provide a common language for goods and facilitate cross-border transactions. The uniformity of these codes enhances the efficiency of trade processes, customs, and tariff negotiations. Over 200 countries use them as a basis for their customs tariffs.
3. Accurate Tax Calculation
To calculate GST, the HSN code’s precise product identification ensures accurate tax calculation, minimising the risk of errors and discrepancies in tax assessments.
4. Compliance Requirement
For businesses working under the GST regime in India, including HSN codes with GST rates on invoices is a regulatory mandate. This promotes proper reporting and compliance with tax laws.
5. Efficient Data Management
HSN codes serve as an effective tool for data management. They streamline the documentation and reporting process, thereby simplifying the management and organisation of product-related data for businesses.
6. Inventory Management
HSN codes also play a crucial role in inventory management. Businesses leverage these codes to categorise and systematically track their products, which helps them avoid overstocking.
7. Reduced Ambiguity
The standardisation of HSN codes and GST rates minimises ambiguity in product classification. This clarity benefits both businesses and tax authorities by providing a clear understanding of the nature of goods or services being traded, thus simplifying the process of taxation and compliance.
Related Read: How to Register for GST Online: A Guide to GST Registration Process
Understand GST HSN Code: HSN Code List for GST
The HSN code is a global standardised system of names and numbers for traded product classification. It has around 5,000 commodity groups, each identified by an 8-digit code.
Understanding the list of HSN code in GST is crucial from a business point of view. The GST HSN code list is structured into 21 sections, 99 chapters, 1,244 headings, and 5,224 subheadings. Each section and chapter categorises a broad array of goods, further specified in the headings and subheadings.
For instance, the HSN code for handkerchiefs made of textile materials is 62.13.90, where:
- The first two digits (62) mean the chapter number for apparel and clothing accessories articles.
- The following two digits (13) denote the heading number for handkerchiefs.
- The last two digits (90) specify the product code for handkerchiefs made of other textile materials.
In India, two digits are added for a more detailed classification, making it an 8-digit code. If the handkerchiefs are made from a manmade fibre, the HSN code would be 62.13.90.10.
Each commodity is also associated with a specific GST rate (%), determined based on its classification under the HSN code (HSN code with GST rate). For example, the GST rate for handkerchiefs made with manmade fibre is 12%.
The HSN system operates on clear guidelines that help standardise how goods are categorised worldwide. This system is structured to classify every item consistently and rationally, which helps streamline international trading activities.
Who Should Use the GST HSN Code?
Under the GST regime, most dealers are required to adopt a two, four, or eight-digit HSN Code for trading in commodities, depending on the previous year’s turnover.
- Dealers having a turnover of less than 1.5 crore rupees in their previous year need not adopt the HSN code for their commodities.
- Dealers with turnover ranging from 1.5 crores to 5 crore rupees are required to use a two-digit HSN Code for their commodities.
- Dealers having turnover of more than 5 crore rupees shall be required to adopt a four-digit HSN Code
- For imports or exports, it is mandatory to have an eight-digit HSN Code, irrespective of the turnover as the GST HSN Code must be compatible with applicable international practices and standards.
Related Read: GST State Code List and Jurisdictions in 2024
HSN Code List with GST Rates: Chapter-Wise Distribution of Commodities.
| Chapter | Commodities | GST Rates | HSN |
| Section I. Animals and Animal Products | 11 | ||
| Chapter 1 | Animals | ||
| Chapter 2 | Edible offal and meat | 0%, 5% | 1 |
| Chapter 3 | Fish, crustaceans, molluscs, and other aquatic invertebrates | 5% | 1 |
| Chapter 4 | Dairy produce, honey, birds’ eggs, and other edible products of animal origin that are not mentioned elsewhere | 5%, 12% | 1 |
| Chapter 5 | Other animal-origin products that are not mentioned elsewhere | 5% | 2 |
| Section II. Vegetables and Vegetable Products | |||
| Chapter 6 | Live trees and plants, roots, bulbs, etc., ornamental foliage and cut flowers | Nil | 2 |
| Chapter 7 | Edible vegetables, certain roots and tubers | 0%, 5% | 1 |
| Chapter 8 | Edible fruit and nuts, the peel of citrus fruits or melons | 0%, 5%, 12% | 1 |
| Chapter 9 | Tea, coffee, mate and spices | 0%, 5%, 12% | 1 |
| Chapter 10 | Cereals | 5%, 18% | 5 |
| Chapter 11 | Milling products, malt, wheat gluten, starches, and inulin | 0%, 5% | 1 |
| Chapter 12 | Oil seeds and oleaginous fruits, grains, straw and fodder, seeds and fruit, and industrial or medicinal plants | 5% | 1 |
| Chapter 13 | Lac, gum, resin, and other saps and extracts | 5% | 1 |
| Chapter 14 | Vegetable plaiting materials, and vegetable products that are not specified elsewhere | 5% | 1 |
| Section III. Animal or Vegetable Oils, Their Cleavage Products, Waxes, and Prepared Edible Fats | |||
| Chapter 15 | Animal or vegetable oils, their cleavage products, waxes, and prepared edible fats | 5%, 12%, 18% | 1 |
| Section IV. Prepared Food, Beverages, Spirits, Tobacco and Tobacco Substitutes | |||
| Chapter 16 | Preparation of meat, fish or crustaceans, molluscs, or any other aquatic invertebrates | 12% | 1 |
| Chapter 17 | Sugar and sugar confectionery | 5%, 12%, 18% | 1 |
| Chapter 18 | Cocoa and cocoa preparations | 5%, 18% | 1 |
| Chapter 19 | Preparations of cereals, starch, flour, milk, and pastry products | 0%, 5%, 18% | 1 |
| Chapter 20 | Preparation of vegetables, fruits, nuts, or plant parts | 12% | 1 |
| Chapter 21 | Miscellaneous edible preparations | 0%, 5%, 12%, 18% | 1 |
| Chapter 22 | Beverages, vinegar, and spirits | 0%, 12%, 18%, 28% | 1 |
| Chapter 23 | Residue and food waste, prepared animal fodder | 5% | 1 |
| Chapter 24 | Tobacco and tobacco substitutes that are manufactured | 18%, 28% | 1 |
| Section V. Minerals | |||
| Chapter 25 | Salt, earths and stones, sulphur, plastering material, lime, and cement | 5%, 28% | 1 |
| Chapter 26 | Ores, slag, and ash | 5%, 18% | 1 |
| Chapter 27 | Mineral fuel, mineral oils and products of their distillation, mineral waxes, and bituminous substances | 5%, 18% | 1 |
| Section VI. Chemical Products or of Allied Industries | |||
| Chapter 28 | Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals, radioactive elements, or isotopes | 5%, 18% | 1 |
| Chapter 29 | Organic chemicals | 5%, 12%, 18% | 1 |
| Chapter 30 | Pharmaceutical products | 5%, 12% | 2 |
| Chapter 31 | Fertilisers | 5%, 18% | 1 |
| Chapter 32 | Tanning or dyeing extracts, tannins and their derivatives, dyes, pigments, and other colouring matter, varnishes and paints, inks, putty and other mastics | 18% | 1 |
| Chapter 33 | Essential oils and resinoids, cosmetic or toilet preparations, perfumery | 12%, 18% | 1 |
| 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 | 18% | 1 |
| Chapter 35 | Albuminoidal substances, glues, enzymes, and modified starches | 18% | 1 |
| Chapter 36 | Explosives, pyrotechnic products, pyrophoric alloys, certain combustible preparations, and matches | 18% | 1 |
| Chapter 37 | Photographic or cinematographic goods | 12%, 18% | 1 |
| Chapter 38 | Miscellaneous chemical products | 12%, 18% | |
| Section VII. Plastics, Rubber, and Articles Thereof | |||
| Chapter 39 | Plastics and plastic articles | 12%, 18% | 2 |
| Chapter 40 | Rubber and rubber articles | 5%, 18% | 1 |
| Section VIII. Raw Hides and Skins, Furskins and Articles Thereof, Leather, and Related Goods | |||
| Chapter 41 | Raw hides and skins (other than furskins) and leather | 5%, 12% | 1 |
| Chapter 42 | Articles made of leather, travel goods, handbags and similar containers, saddlery and harnesses, articles made of animal gut (other than silkworm gut) | 0%, 12%, 18% | 1 |
| Chapter 43 | Furskins and artificial fur and articles thereof | 18% | 1 |
| Section IX. Wood and Wooden Articles, Wood Charcoal, Cork and Articles of Cork, Basket Ware and Wickerwork, Manufacturers of Straw, Esparto or Other Plaiting Material | |||
| Chapter 44 | Wood and wooden articles, wood charcoal | 5%, 12%, 18% | 1 |
| Chapter 45 | Cork and articles of cork | 5%, 12%, 18% | 2 |
| Chapter 46 | Manufactures of straw, esparto or other plaiting materials, basket ware and wickerwork | 5% | 1 |
| Section X. Pulp of Wood or Other Fibrous Cellulosic Material, Recovered Paper or Paperboard (Waste and Scrap), Paper and Paperboard and Articles Thereof | |||
| Chapter 47 | Pulp of wood or other fibrous cellulosic material, recovered paper or paperboard (waste and scrap) | 5%, 12%, 18% | 3 |
| Chapter 48 | Paper and paperboard, articles made of paper pulp, or articles made of paper or paperboard. | 5%, 18% | 1 |
| Chapter 49 | Printed books, pictures, newspapers, and other products of the printing industry, typescripts, manuscripts, and plans | 5%, 12%, 18% | 1 |
| Section XI. Textile and Textile Articles | |||
| Chapter 50 | Silk | 5%, 12%, 18% | 8 |
| Chapter 51 | Wool, fine or coarse animal hair, horse hair yarn and other woven fabrics | 5% | 1 |
| Chapter 52 | Cotton | 5% | 1 |
| Chapter 53 | Other vegetable textile fibres, paper yarn and woven fabrics made of paper yarn | 0%, 5% | 1 |
| Chapter 54 | Man-made filaments | 5%, 12% | 4 |
| Chapter 55 | Man-made staple fibres | 5%, 12% | 2 |
| Chapter 56 | Wadding, felt and nonwovens, twine, cordage, special yarns, ropes, and cables and articles thereof | 5%, 12%, 18% | 1 |
| Chapter 57 | Carpets and textile floor coverings | 12% | 1 |
| Chapter 58 | Special woven fabrics, lace tapestries, tufted textile fabrics, trimmings, and embroidery | 5%, 12% | 1 |
| Chapter 59 | Impregnated, covered, coated, or laminated textile fabrics, textile articles made for industrial use. | 12% | 1 |
| Chapter 60 | Knitted or crocheted fabrics | 5% | 3 |
| Chapter 61 | Articles of apparel and clothing accessories that are knitted or crocheted | 5%, 12% | 1 |
| Chapter 62 | Articles of apparel and clothing accessories that are not knitted or crocheted | 12% | 1 |
| Chapter 63 | Other made up textile articles, sets, worn clothing and textile articles, and rags | 5%, 12%, 18% | 1 |
| Section XII. Footwear, Headgear, Umbrellas, Walking Sticks and Seat Sticks, Whips, Riding Crops and Parts Thereof, Artificial Flowers, Articles of Human Hair, Prepared Feathers and Articles Made Thereof | |||
| Chapter 64 | Footwear, gaiters, etc., and the parts of such articles | 12%, 18% | 1 |
| Chapter 65 | Headgear and parts thereof | 0%, 5%, 18% | 1 |
| Chapter 66 | Umbrellas and sun umbrellas, walking sticks, seat sticks, riding crops and parts thereof, and whips | 5%, 12%, 18% | 4 |
| Chapter 67 | Prepared feathers and down and articles made thereof, artificial flowers, and articles made of human hair | 12%, 18% | 1 |
| Section XIII. Articles Made of Stone, Plaster, Asbestos, Cement, Mica, or Other Similar Materials, Glass and Glassware, Ceramic Products | |||
| Chapter 68 | Articles made of stone, plaster, cement, asbestos, mica or similar materials | 18% | 1 |
| Chapter 69 | Ceramic products | 0%, 12%, 18% | 2 |
| Chapter 70 | Glass and glassware | 18% | 1 |
| Section XIV. Natural or Cultured Pearls, Precious Metals Clad With Precious Metal and Articles Thereof, Precious or Semi-Precious Stones, Coins, Imitation Jewellery | |||
| Chapter 71 | Natural or cultured pearls, precious metals, metals that are clad with precious metal and articles thereof, precious or semi-precious stones, imitation jewellery, coins | 0%, 3% | 1 |
| Section XV. Base Metal and Articles Made of Base Metal | |||
| Chapter 72 | Iron and steel | 18% | 1 |
| Chapter 73 | Articles made of iron or steel | 18% | 1 |
| Chapter 74 | Copper and articles thereof | 0%, 18% | 1 |
| Chapter 75 | Nickel and articles thereof | 18% | 1 |
| Chapter 76 | Aluminium and articles thereof | 12%, 18%, 28% | 1 |
| Chapter 77 | (Reserved for possible future use) | 12%, 18%, 28% | 6 |
| Chapter 78 | Lead and articles thereof | 0%, 18% | 1 |
| Chapter 79 | Zinc and articles thereof | 0%, 18% | 1 |
| Chapter 80 | Tin and articles thereof | 0%, 18% | 1 |
| Chapter 81 | Other base metals, cermets, and articles thereof | 18% | 1 |
| Chapter 82 | Tools, implements, spoons and forks, cutlery, of base metal, and parts thereof | 18% | 1 |
| Chapter 83 | Miscellaneous articles made of base metal | 18% | 1 |
| Section XVI. Machinery and Mechanical Appliances, Electrical Equipment and Parts Thereof, Sound Reproducers and Recorders, Television Image and Sound Reproducers and Recorders, and Parts and Accessories of Such Articles | |||
| Chapter 84 | Nuclear reactors, machinery and mechanical appliances, boilers, and parts thereof | 0%, 12%, 18%, 28% | 1 |
| 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 | 18%, 28% | 1 |
| Section XVII. Vehicles, Aircraft, Vessels, and Associated Transport Equipment | |||
| 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 | 18% | 1 |
| Chapter 87 | Vehicles other than tramway or railway rolling stock, and parts and accessories thereof | 18%, 28% | 1 |
| Chapter 88 | Aircraft, spacecrafts, and parts thereof | 5%, 18%, 28% | 1 |
| Chapter 89 | Ships, boats and floating structures | 0%, 5%, 28% | 1 |
| Section XVIII. Optical, Photographic, Cinematographic, Checking, Measuring, Precision, Medical or Surgical Instruments and Apparatus, Musical Instruments, Clocks and Watches, Parts and Accessories Thereof | |||
| Chapter 90 | Optical, photographic, cinematographic, checking, measuring, precision, medical or surgical instruments and apparatus, parts and accessories thereof | 5%, 12%, 18% | 1 |
| Chapter 91 | Clocks and watches and parts thereof | 18% | 1 |
| Chapter 92 | Musical instruments, and parts and accessories of such articles | 0%, 18% | 1 |
| Section XIX. Arms and Ammunition, Parts and Accessories Thereof | |||
| Chapter 93 | Arms and ammunition, parts and accessories thereof | 18% | 1 |
| Section XX. Miscellaneous Manufactured Articles | |||
| 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 | 18% | 1 |
| Chapter 95 | Toys, games and sports requisites, parts and accessories thereof | 0%, 12%, 18% | 1 |
| Chapter 96 | Miscellaneous manufactured articles | 0%, 5%, 12%, 18%, 28% | 1 |
| Section XXI. Works of Art, Collectors’ Pieces and Antiques | |||
| Chapter 97 | Works of art, collectors’ pieces and antiques | 5%, 12% | 1 |
| Chapter 98 | Project imports, laboratory chemicals, personal imports by air or post, passenger’s baggage, ship stores | 0%, 5%, 12%, 18% | 1 |
| Chapter 99 | Services | ||
How Can Businesses Implement HSN Codes in their Process?
1. Product Categorisation
Analyse your product or service offerings and categorise them based on their characteristics and nature.
2. Understand HSN Code Structure
Familiarise yourself with the structure of the HSN code list in GST and its components to accurately assign codes to your products.
3. Training and Awareness
Train relevant department and staff members on the importance of HSN codes, their role in GST compliance, and how to assign them to products. This will ensure that everyone agrees on HSN code usage.
4. Integration with ERP Systems
Integrate GST HSN code into your Enterprise Resource Planning (ERP) systems to ensure seamless implementation and automated coding. This reduces the chances of human error and increases efficiency.
5. Regular Updates
Stay informed about GST rates 2024 and changes or updates to HSN codes, for updating your systems and processes accordingly.
6. Incorporate HSN Codes in Invoices
Ensure that GST HSN code rates are included on invoices for all goods and services supplied, as this is a mandatory requirement for GST compliance.
7. Cross-Functional Collaboration
Collaborate with departments such as finance, sales, and IT to ensure a coordinated effort in implementing HSN codes.
8. Review and Audit
Conduct regular reviews and audits of the implementation of your HSN code for GST to identify any discrepancies or areas for improvement.
9. Documentation and Record-keeping
Maintain accurate records of HSN codes assigned to products and services for future reference and audit purposes.
10. Engage with Suppliers and Vendors
Implement effective communication strategies with suppliers and vendors to maintain consistency in HSN code application across the supply chain.
11. Compliance Checks
Regularly check that your HSN code implementation aligns with the latest GST regulations and compliance requirements.
12. Seek Professional Advice
Consult with tax professionals or experts to address any specific challenges or questions related to HSN code implementation.
Read More: Understand the difference between HSN and SAC Code
Conclusion
The decision to move to the online taxation system and implement the HSN code under GST for the classification of goods liable for taxation has brought about a complete reform in the country’s taxation system. However, the government is trying to make the transition process even more transparent. For this, many goods are being shifted from one slab to another depending on their usage and the trade. Though it may require some preparation work for professionals to effect such a transition, there are various automated GST compliance solutions to support the process.
Frequently Asked Questions (FAQs)
1. What is the GST rate for HSN code?
GST rates for HSN codes vary based on the product or service, ranging from 0% to 28%.
2. How to add the HSN code in the GST portal?
To add an HSN code in the GST portal, log in, navigate to ‘Services’ > ‘Registration’ > ‘Amendment of Registration Non-core fields’, and enter the HSN/SAC codes.
3. Is the HSN code 6-digit or 8-digit?
HSN codes are typically 6 digits globally, but in India, they are extended to 8 digits for more precise classification.
4. Is the HSN Code required during GST return filing?
HSN codes are required during GST return filing for businesses with turnover above specified thresholds.
5. Is it mandatory to use the HSN code for every business transaction?
Using HSN codes is mandatory for businesses with a turnover exceeding ₹5 crore and for all B2B transactions.
6. How can I find the correct HSN code for my product or service?
To find the correct HSN code, use the GST portal’s search feature or refer to the HSN chapter list for detailed classification.
7. Are there any penalties for using the wrong HSN code in my business transactions?
Penalties for incorrect HSN codes can be up to ₹50,000 (₹25,000 for CGST and SGST each).
8. Is the HSN code list the same for all countries, or does it vary internationally?
The HSN code list is harmonised internationally but may have slight variations in some countries based on the nature of goods.
9. How often is the HSN code list updated, and how can I access the latest version?
The HSN code list is updated periodically; access the latest version through the GST portal or the World Customs Organisation.
10. What is the Purpose of adopting the GST HSN Code in India?
The GST HSN Code in India aims for uniformity in taxing merchandise, aligning with other countries following the HSN system. This standardisation simplifies GST taxation and reduces international trade costs.
