HSN or Harmonized System of Nomenclature is a 6-digit code that holds a wide array of 5000+ products. The system is accepted worldwide, with over 200 countries embracing the system. HSN was introduced to assist in the systematic classification of goods globally. It was established in 1988 by the world customs organization WCO and had different versions (5 versions) implemented internationally.
How HSN works
The system has 5000+ products, which are classified. Each group is identified with a unique six-digit code. They are also arranged in a legal and logical order which follows well-structured rules for better classification.
HSN plays a significant role as it helps classify goods from all over the world. It provides a systematic and logical order to clear identification. The majority of merchandise in the world is classified according to HSN. Each commodity has its own HSN and is accepted in many countries worldwide. The number slightly differ in some countries according to the nature of the goods.
HSN in India?
India is among the many countries in the world customs organization WCO. They have been members since 1971. The country first used the 6-digit code to classify the commodities for both customs and central excise. The two digits were added by the custom and central excise, making the codes more precise. This created a total of 8-digit code.
The HSN system contains 21 sections, 99 chapters, and 1,244 headings plus 5,224 subheadings. Each section has chapters, which are divided into heading and subheadings. The section and chapter tell about the categories of goods while the heading and subheading tell about the product details.
Example of HSN
- The first digit, 62, represents the chapter number.
- The next two numbers represent the heading number for the handkerchief.
- The last two numbers are the product code for the handkerchiefs made of any other textile material.
Service Accounting Code SAC in GST
Services also work as goods; they are classified uniformly to help recognize, measure, and taxation. The legal codes for services are called services accounting codes (SAC).
HSN in GST
The above codes should be declared in every tax invoice provided by the taxpayer. The system will use the previous year’s turnover to get the HSN digits used. The 8-digit number is significant for any export and imported goods.
Purpose of HSN in GST
- HSN code’s primary purpose is to make the GST systematic and accepted globally.
- The codes help save time and resources since you don’t require to upload a detailed description of the goods.
- Suppose the turnover goes beyond the income slabs of an individual. They must provide the HSN and SAC details while filing the GSTR-1.
UQC means unique quantity code, which is the measurement of different products such as kilograms, liter, etc. The law requires any tax invoice, credit note, or debit note to have a UQC description. Getting the right HSN code for the products and SAC details helps reduce errors while filling the GSTR returns.