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The HSN (Harmonized System of Nomenclature) code is a globally accepted classification system used for the systematic identification of goods. It is essential for businesses in India, especially those registered under GST (Goods and Services Tax), as it helps in standardizing taxation and trade across different countries.
If you are a business owner, trader, or manufacturer in India, understanding HSN codes can help you avoid tax complications, ensure smooth compliance, and streamline your invoicing process. This guide will explain what the HSN code is, how it works in India, how to find your HSN code, and why it is important for businesses under GST.
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What is HSN Code?
The Harmonized System of Nomenclature (HSN) is an internationally accepted six-digit system developed by the World Customs Organization (WCO) to classify goods in a structured manner. It helps businesses and governments track imports, exports, and domestic trade more efficiently.
India, like many other countries, uses HSN codes for taxation purposes. Under the GST system, HSN codes are mandatory for businesses to correctly classify their goods and determine the applicable GST rate.
Why is HSN Code Important in India?
- Standardized Taxation – HSN codes help businesses apply the correct GST rate to different goods, avoiding tax confusion.
- Smooth International Trade – Since HSN is globally accepted, it simplifies import and export processes.
- Reduced Tax Evasion – Accurate classification of goods prevents tax manipulation and ensures compliance.
- Efficient Invoicing – Using HSN codes on invoices ensures accuracy in GST returns and smooth processing of input tax credit (ITC).
- Automated Compliance – The Indian GST system auto-detects applicable GST rates based on HSN codes, making filing returns easier.
How Does HSN Code Work in India?
In India, the HSN system follows a structured approach:
- HSN Code Structure:
- 2-digit HSN – Used for a broad category of goods.
- 4-digit HSN – Used for specific product categories.
- 6-digit HSN – Internationally accepted classification for global trade.
- 8-digit HSN – Further classification adopted in India for greater accuracy.
For example:
| Product |
2-digit HSN |
4-digit HSN |
6-digit HSN |
| Rice |
10 |
1006 |
100610 |
| Soap |
34 |
3401 |
340119 |
| Mobile Phones |
85 |
8517 |
851712 |
Businesses must use HSN codes on GST invoices, E-way bills, and GST returns to comply with taxation laws.
HSN Code Applicability Under GST
The requirement to mention HSN codes depends on a business’s annual turnover:
| Turnover |
HSN Requirement |
| Up to ₹5 crore |
4-digit HSN (for B2B transactions) |
| Above ₹5 crore |
6-digit HSN (for all transactions) |
| Imports/Exports |
8-digit HSN |
Note: For small businesses with a turnover of less than ₹5 crore, HSN codes are optional for B2C (Business to Customer) transactions. Also, 8-digit HSN is only required in customs filings, not for GST returns.
How to Find the HSN Code for Your Product?
You can find your product’s HSN code using:
- GST Portal – The government provides a search tool on the GST website to find the applicable HSN code.
- HSN Code Books – Businesses can refer to the official WCO HSN classification or GST council’s HSN handbook.
- Trade Associations – Industry bodies and professional consultants can help businesses find the correct HSN code.
To identify an HSN code, follow these steps:
- Identify the type of goods your business deals in.
- Search for the broad category under the WCO HSN system.
- Narrow down the classification using GST rate charts.
For instance, if you sell electronic goods, your HSN code would fall under Chapter 85 (Electrical machinery and equipment).
HSN Code vs SAC Code
While HSN codes classify goods, the SAC (Services Accounting Code) is used to classify services under GST.
| Feature |
HSN Code |
SAC Code |
| Used for |
Goods classification |
Services classification |
| Number of Digits |
2, 4, 6, or 8 |
Fixed 6 digits |
| Example |
100610 (Rice) |
998312 (IT services) |
Examples of HSN Codes in Different Industries
Here are some common HSN codes used in various industries:
- Agriculture & Food Products
- Rice – 100610
- Wheat – 100190
- Milk – 0401
- Pharmaceuticals & Healthcare
- Medicines – 3004
- Medical Equipment – 9018
- Vaccines – 300220
- Textile & Garments
- Cotton – 5201
- Silk Fabrics – 5007
- Readymade Garments – 6201
- Electronics & Machinery
- Mobile Phones – 8517
- LED TVs – 8528
- Washing Machines – 8450
Mistakes to Avoid While Using HSN Code
Incorrect HSN Selection – Using the wrong HSN code can result in tax mismatches and penalties.
Omitting HSN on Invoices – Not mentioning the correct HSN code on GST invoices can lead to compliance issues.
Not Updating HSN as per GST Rules – The government frequently updates HSN classifications; businesses should stay informed.
Using 2-digit HSN for Large Businesses – Companies with over ₹5 crore turnover must use 6-digit HSN instead of 2-digit codes.
How HSN Codes Benefit Businesses?
Ensures GST Compliance – Helps businesses apply the correct tax rates and avoid penalties.
Simplifies International Trade – Recognized globally, making import/export hassle-free.
Speeds Up Customs Clearance – Accurate HSN codes prevent delays in customs clearance.
Reduces Errors in GST Filing – Standardized classification helps avoid mismatches in tax returns.
Enhances Transparency – Provides a clear structure for taxation and invoicing.
Conclusion
The HSN code system is an essential part of GST compliance in India, ensuring that businesses apply the correct tax rates and maintain transparency in trade. Every manufacturer, trader, or exporter must identify and use the right HSN code to avoid tax complications.
By understanding what the HSN code is, how to use it, and why it matters under GST, Indian taxpayers can simplify their tax filings, improve business efficiency, and avoid penalties.
For more details, businesses can refer to the GST portal or consult a tax expert to ensure compliance with HSN code regulations.
