HSN Code in GST: Everything You Need to Know

In the dynamic landscape of tax compliance, keeping current is vital for business success. GST offers transparency updates on tax obligations and enhances the overall tax experience, aiding smoother financial operations.

In this blog, we will understand the meaning of  HSN Code and its Utility.

What is HSN Code?

HSN code stands for “Harmonized System of Nomenclature”. The HSN code is a numerical classification system used to categorise goods for taxation and trade purposes. It’s employed to streamline the taxation process, ensuring uniformity and accuracy in tax assessment. HSN codes consist of digits and denote specific product categories, helping businesses determine the appropriate GST rates and facilitating precise reporting for compliance.

It is mandatory for both B2B and B2C tax invoices on the supplies of Goods and Services. HSN was introduced in 1988 by the World Customs Organization (WCO). It was introduced for a systematic classification of goods, both national and international. It is a 6-digit code that classifies various products. India has been using HSN codes since 1986 to classify commodities for Customs and Central Excise. HSN codes apply to Customs and GST. The codes prescribed in the Customs tariff are used for the GST purposes, too. HSN is used all over the world. There are different HSN codes for various commodities.

Why is HSN important under GST?

The purpose of HSN codes is to make GST systematic and globally accepted.

HSN codes will remove the need to upload the detailed description of the goods. This will save time and make filing easier since GST returns are automated. 

A dealer or a service provider must provide HSN/SAC wise summary of sales in his GSTR-1 if his turnover falls in above slabs.

What is SAC HSN Code in GST?

Like goods, services are also classified uniformly for recognition, measurement and taxation. Codes for services are called Services Accounting Code or SAC.

Understanding the HSN Code 

The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.

• Each Section is divided into Chapters. Each Chapter is divided into Headings. Each Heading is divided into Sub Headings.
• Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail.

HSN in GST

HSN codes to be declared

Also Read: HSN Code Mandatory In GST: When And Why

Declaration of HSN Code for Goods and Services

*Annual aggregate turnover for the previous financial year, i.e., for reporting invoices in FY 2023-24, turnover to be referred must be of FY 2022-23.

• These HSN codes must be declared in every tax invoice issued by the taxpayer under GST.
• All 8 digits of HSN code is mandatory in case of export and imports under the GST.

HSN Codes Offer Several Advantages For Taxpayers

1. Clarity in Taxation

HSN codes provide a standardised way to classify goods, ensuring clarity on the applicable tax rates for each product. It helps taxpayers accurately determine the correct tax liability.

2. Accurate Tax Calculation:

 By using the correct HSN code, taxpayers can avoid errors in tax calculation. It prevents overpayment or underpayment of taxes, reducing the risk of penalties or compliance issues.

3. Efficient Compliance

 HSN codes facilitate accurate reporting of supplies in GST returns. It leads to smoother compliance processes, as the tax authorities can easily verify the accuracy of reported data.

4. Reduced Disputes

 Clear categorisation using HSN codes minimizes the chances of disputes between taxpayers and tax authorities regarding the appropriate tax rate for a product.

 5. Ease of Cross-Verification:

  Tax authorities can cross-verify the HSN codes mentioned in invoices and returns, leading 

   to a more transparent and accountable tax ecosystem.

6. Export and Import

 HSN codes are crucial for international trade. Exporters and importers can use them to classify goods, ensuring consistency in tariffs and facilitating smoother customs processes.

7. Faster Refunds

 Accurate HSN codes can expedite refund processes by ensuring that the supplied information matches the criteria for claiming refunds. 

8. Uniformity

 HSN codes promote uniform taxation across the country, as they provide a standardised  classification system that every taxpayer can use. 

Related Read: ​​How to Add HSN code in GST Portal?

Bank Charges HSN Code

Financial and related services (including financial and banking services) are classified under the HSN/SAC code 9971. This SAC code plays a vital role in classifying and regulating the services offered by financial institutions such as banks, non-banking financial companies (NBFCs), insurance companies, and other financial entities. The 9971 code group covers a range of services associated with banking, insurance, lending, investments, and other financial offerings. On most banking services such as maintenance of accounts, credit and debit card services, etc., a GST rate of 18 percent is applicable.

Installation Charges HSN Code

In India, the installation charges are classified under the HSN/SAC code 9987. The first two digits, i.e., 99 represent the chapter which is the Services in which the installation charges are included in the HSN classification system. The next two digits ’87’ followed by subsequent two digits particularly identify the installation charges as the service or product being classified. The GST rate for installation charges is 5 percent or 18 percent depending on the product of installation.

The installation charges include setting up and installation of various equipment or systems. Some of these may be installation of machinery, solar systems, Heating, Ventilation, and Air Conditioning (HVAC) systems, etc.

MS Pipe HSN Code

Mild Steel (MS) pipes are classified under the HSN Code 7306. The first two digits, i.e. 73 indicate that the pipe is categorized as an item made from iron or steel under Chapter 73. The subsequent digits give more specific details about the MS pipe product.

Advantages of the MS Pipe HSN code

Here are the advantages of MS Pipe HSN Code.

In the complex world of domestic and international trade, having a specific MS Pipe HSN code serves as a keystone for businesses.

TMT Bar HSN Code

The HSN Code for TMT (Thermo-mechanically treated) bars is 7214. The first two digits, i.e. 72 represent the Chapter code which is an Iron and Steel article. The full HSN code for TMT bar is 72141090. TMT Bars attract a GST of 18 percent.

Advantages of TMT Bar HSN Code

Here are the advantages of TMT Bar HSN Code.

The TMT Bar HSN Code helps businesses navigate the complexities associated with trading in TMT Bars.

MCB HSN Code

The HSN code for Miniature Circuit Breakers (MCBs) is 8536. The first two digits of the HSN code, i.e. 85 represents the Chapter Number 85 which is of electric machinery and equipment. The HSN code 8536 represents electrical apparatus for switching or protecting electrical circuits.

The complete 6 digit HSN code for MCB is 85362030. The sub-heading 853620 represents automatic circuit breakers.

The GST applicable for MCBs is 18 percent. For those involved in the business of Miniature Circuit Breakers, a specific MCB HSN code ensures precise classification according to the GST regulations.

Fabrics HSN Code

The textile fabric industry in India has grown tremendously. There are businesses engaged in the trading of various textiles. In the GST system, various HSN codes are assigned to different fabrics depending on their type, weight, and composition.

Fabrics HSN Codes

Here are some common HSN codes for fabrics:

Fabrics from natural fibers

Fabrics from synthetic fibers

Fabrics made from blended fibers

Other special fabrics

These HSN codes for different fabrics help businesses with GST compliance and keep a track of the different fabrics sold by them.

Ceiling Fan HSN code

India is one of the leading countries in the world when it comes to exporting ceiling fans. The HSN code for ceiling fans is 84145120.

The first two digits of the complete code, i.e. 84 represent the Chapter that includes ceiling fans, which is nuclear reactors, machinery, mechanical appliances, boilers, and other parts thereof. The complete six digit HSN Code represents the product itself, i.e. ceiling fan.

Ceiling fans have an 18 percent GST. With the availability of a range of fans, a specific HSN code for ceiling fans provides clarity on the type of fan being sold and distributed.

9973 HSN code

The HSN Code 9973 refers to leasing or rental services associated with transport equipment, including containers, with or without operator.

Common 9973 HSN Codes

Here are some of the most common 9973 HSN Codes.

The GST rate of 9973 HSN Code is 18 percent.

7306 HSN code

7306 is the HSN Code for tubes, pipes, and hollow profiles of iron or steel. For example, open seam or welded, riveted or similarly closed.

The first two digits of the HSN code, i.e. 73 represent Chapter Number 73 which includes goods of iron or steel. The entire four digits of the HSN code 7306 represent other tubes, pipes, and hollow profiles.

Range of products included in 7306 HSN code

The 7306 HSN code includes the following products:

• Seamless tubes and pipes
• Welded tubes and pipes
• Riveted or similarly closed tubes and pipes
• Galvanized pipes
• Non-galvan pipes of iron
• Open seam tubes and pipes
• Steel pipes
• Mechanical pipes
• Hydraulic pipes

The GST applicable on most products which are classified under 7306 HSN code is 18 percent.

Namkeen HSN Code

Namakeen are a popular snack in India. There are several leading brands in the country involved in the manufacturing and distribution of Namkeens.

Namkeens, also known as savory foods, include bhujiya, sev, chips, and snack foods.

The HSN code for Namkeens and other extruded/expanded savory products is 19059030. The first two digits of the code, i.e. 19 represent the chapter that includes preparations made from cereals, flour, milk, starch, and pastry products. Namkeens also fall under this category.

Difference in the taxation rate

• Branded namkeens, i.e. those manufactured by a registered brand name fall in the category of 12 percent GST for each product sold.
• Non-branded namkeens, i.e. those with unregistered brand names fall in the category of 5 percent GST for each product sold.

Repairing HSN code

The HSN code for repairing and maintenance services is 9987. This includes the maintenance of machinery and equipment. This code also includes repairs related to vehicles and other household appliances.

Division of repairing services into further sub-categories

Under the HSN code 9987, repairing services are further divided into different types based on the nature of services offered.

The repairs help to restore items that are not functioning properly due to a faulty or broken part. The specific HSN codes for repairs helps businesses file accurate GST returns.

Delivery charges HSN Code

In India, the delivery charges are classified under different HSN Codes based on the type of delivery service.

HSN codes for delivery charges

On most delivery services, 18 percent GST is applicable. However, 5 percent GST is applicable on postal services, while 12 percent GST is applicable on courier services. For businesses providing delivery-related services, specific delivery charges HSN codes help in GST compliance and knowing the type of service offered.

Hair Oil HSN Code

The HSN Code for hair oil is 3305. The first two digits, i.e. 33 represent Chapter 33 (preparations for use on the hair) under which hair oil is categorized.

Detailed sub-classification of hair oil HSN code

Here is an in-depth classification of hair oil HSN code

GST rates for different hair oils

Different hair oils have different GST rates.

• The GST rate for most hair oils is 18 percent. For coconut-based hair oils, the applicable GST rate is 12 percent.
• For hair oils classified as Ayurvedic or Unani medicine, the GST rate is 5 percent.

The Bottom Line

It’s essential for businesses to correctly determine and apply the appropriate HSN code to their products to ensure accurate taxation. They typically include the HSN code in invoices and other relevant documents for GST compliance.

Businesses must be aware of the HSN codes applicable to their products, as these codes determine the tax rates and other regulatory requirements associated with them.

Do you need help Finding Your Products or service HSN or SAC code? CaptainBiz is the ultimate GST billing software that helps you provide the same and also Provides simple invoicing, real-time inventory management, and cost reduction, allowing you to grow your business seamlessly.

All HSN Code and It’s Description

Frequently asked questions:

• What is the difference between an HSN code and a SAC code? 

HSN codes are used for the classification of goods, whereas SAC codes are used for services.

• Where are HSN codes required to be mentioned?

HSN codes are required to be mentioned on invoices or Bills of Supply and in the GSTR-1 return.

• Is HSN code 4-digit or 8-digit?      

HSN Codes are typically 6-digit codes. However, in India, we have 8-digit HSN codes where the first two digits represent the chapter number, the next two digits represent the heading number, the following two digits comprise the sub-heading, and the last two digits are the tariff item.

• What is HS and HSN code?

HSN Code is the same as the Harmonised System Code (HS Code) in shipping. However, it is more commonly known as the HSN in India. Like the HS Code list, each of the HSN codes for import and export of goods comprises six digits.

Moulik Jain

I am a seasoned marketer specializing in Tax, Finance, and MSMEs. I bring a wealth of hands-on experience to demystify complex subjects, providing insightful guidance for entrepreneurs and finance enthusiasts alike.

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