GST FAQ...........

What is HSN Code?

The Harmonized Commodity Description and Coding System generally refers to “Harmonized System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It first came into effect in 1988.

How does HSN code work?

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

Why is HSN important?

The main purpose of HSN is to classify goods from all over the World in a systematic and logical manner. This brings in a uniform classification of goods and facilitates international trade.

HSN Worldwide

The HSN system is used by more than 200 countries and economies for reasons such as:

• Uniform classification
• Base for their Customs tariffs
• Collection of international trade statistics

Over 98% of the merchandise in international trade is classified in terms of the HSN.

Harmonized System of Nomenclature number for each commodity is accepted by most of the countries. The 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

India is a member of World Customs Organization(WCO) since 1971. It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8 digit classification.

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.

For example:

Handkerchiefs made of Textile matters 62.13.90

• First two digits (62) represent the chapter number for Articles of apparel and clothing accessories, not knitted or crocheted.
• Next two digits (13) represent the heading number for handkerchiefs.
• Finally, last two digits (90) is the product code for handkerchiefs made of other textile materials.

India has 2 more digits for a deeper classification.

If the handkerchiefs are made from a man-made fibre, then the HSN code is 62.13.90.10.

If the handkerchiefs are made from silk or waste from silk., then the HSN code is 62.13.90.90.

Services Accounting Code (SAC) in GST

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

For example:

Legal documentation and certification services concerning patents, copyrights and other intellectual property rights-- 998213

• The first two digits are same for all services i.e. 99
• The next two digits (82) represent the major nature of service, in this case, legal services
• The last two digits (13) represent detailed nature of service, i.e., legal documentation for patents etc.

HSN in GST

HSN codes to be declared

Turnover	No. of digits of HSN to be declared
Upto 1.5 crore	0
1.5 crore- 5 crore	2
More than 5 crore	4

• These HSN codes must be declared in every tax invoice issued by the taxpayer under GST.
• The turnover for previous year will be considered as a basis to find out number of HSN digits to be used.

All 8 digits of HSN code is mandatory in case of export and imports under the GST.

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.

12. HSN - wise summary of outward supplies

Sections	HSN Code List for
Section 1	Live Animals, Animal Products
Section 2	Vegetable Products
Section 3	Animal or Vegetable Fats and Oils and their cleavage products, prepared edible fats, Animal or Vegetable waxes
Section 4	Prepared Foodstuffs, Beverages, Spirits and Vinegar, Tobacco and Manufactured Tobacco Substitutes
Section 5	Mineral Products
Section 6	Product of the chemicals or allied Industries
Section 7	Plastics and articles thereof, Rubber and articles thereof
Section 8	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 )
Section 9	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
Section 10	Pulp of wood or of other Fibrous Cellulosic Material, Recovered ( Waste and scrap ) paper or paperboard, paper and paperboard and articles thereof
Section 11	Textile and textile articles
Section 12	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
Section 13	Articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware
Section 14	Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, and articles thereof, Imitation Jewellery, Coins
Section 15	Base Metals and articles of Base Metal
Section 16	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
Section 17	Vehicles, Aircraft, Vessels and Associated Transport Equipment
Section 18	Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments, parts and accessories thereof
Section 19	Arms and ammunition, parts and accessories thereof
Section 20	Miscellaneous Manufactured Articles
Section 21	Works of art, Collectors' Pieces and antiques

How can I find my product in HSN list and its relevant HSN Code?

Please visit our handy HSN Calculator to find out both HSN codes of goods & SAC codes of services.

What is UQC?

UQC stands for Unique Quantity Code. In simple terms, it is a unit of measurement such as 1 kilogramme of wheat, 1 litre of oil etc.

What is UQC in GST?

As per CGST Rules, any tax invoice, credit note, debit note must have UQC or quantity unit description.

For example-

100 metres of fabric

Refer our article on UQC for more information.

To minimize errors while filing GST returns, it’s important to know the right HSN code for your product.

Use ClearTax HSN Calculator to find out the HSN code for your product. Our ClearTax GST Software has all the HSN codes inbuilt. You need to select the items you sell only once in the Item Master. Once you are done, your HSN code will be automatically populated in all your invoices and returns.