Goods and Services Tax or GST is the volume-added tax which is levied on goods which are deployed in the domestic market for consumption and on services which are used in the country. It’s a uniform track structure which is was established by the government of India in 2017 to put in place a uniform tax system which is destination based. With the introduction of the GST tax system, there have been substantial tax reforms in the country, which has simplified the process of improving transparency and reducing paperwork. GST amalgamates Central Taxes like sales tax, service tax, excise duty, service taxes, cesses and surcharges and State Taxes like purchase tax, entertainment tax, luxury tax, and sales tax. It also has done removing the effect of many taxes levied by the central government and the state government. The GST tax system was birthed on the premise of “one nation one tax” with the aim of having a single unified tax structure for the whole country. It is governed by the Central Goods and Services Tax Act, 2017. In this blog, we will discuss HSN Code – Chapter Wise Code List & Section Wise Code List.
The GST Council has laid down various guidelines and norms to which businesses are required to adhere to. GST single uniform tax large number of Gurgaon services involved they are placed on down distinct GST slab. There are 5 slabs under which the GST rates are fixed: The NIL slab, where 0% tax is levied on commodity or services used, 5% slab, 12% slab, 18% slab and 28% slab.
Harmonised System of Nomenclature Code
The Harmonised System of Nomenclature or HSN was introduced by the World Customs Organisation or the WCO. The primary object of introducing the HSN codes was to systemically classify global commodities. This code can be used to find out the number of commodities imported and exported in the country and the tax rates in a jurisdiction and also aids in regulating global transactions involving commodities. It has simplified and facilitated the global trade of commodities and goods between different countries across the world. These codes are used globally and goods, both foreign and domestic trade; moreover, it can also be used to gather information and insight into foreign trade and domestic trade which the country is dealing with. Since HSN is a globally recognised standard, the first 6 digits of the HSN code are the same in all countries; however, different countries have developed classifications and added more digits to their own harmonised code systems.
These codes were earlier applicable only for the central excise and customs but posted the implementation of GST in India, imports and exports standardised codes and these codes, which are globally accepted, have also been adopted in India. Now businesses are required to identify their correct code to determine the GST rate of their commodity. The Directorate General of Foreign Trade or the DGFT regulates any addition or changes or formulation of new codes in these codes. Any change in the description of products, removing defunct codes or addition of any new codes are conducted periodically to perfect the HSN code system. These codes have eliminated the need to upload detailed descriptions of the products it saves time and makes it easier to file GST returns since the whole process becomes alternative.
Who Is Required To Apply The Harmonised System Of Nomenclature Code?
The Government of India requires businesses the compulsorily mention a 4 digit or a 6 digit HSN code in table 12 of GSTR-1 and in the tax invoices. Businesses which have a turnover of up to ₹5,00,00,000 the last financial year are required to mention a 4 digit HSN code in there GSTR-1. Meanwhile, businesses with a turnover exceeding ₹5,00,00,000 must mention a 6 digit HSN code and there GSTR-1. An 8 digit HSN code is required to be mentioned by businesses which are involved in import and export.
For exports, it is mandatory to have ITC-HS codes. ITC hey stands for the Indian tariff code or the Indian trade classification. It was adopted for important export operations in India. ITC-HS codes have been segregated into 2 schedules. The first schedule has an 8 digit nomenclature and the second schedule has details pertaining to the goods.
It is mandatory to mention the 8-digit HSN code on the shipping bill. Non-compliance can lead to non-accrual export benefits he did however when it comes to GST, these codes are not compulsory for businesses with a turnover which is less than ₹1.5 crore.
HSN codes are mainly dealt with by traders and dealers who engaged with global trade of commodities and goods. They are required to adopt HSN codes which range from 2 digit codes to 4 digit codes and 8 digit codes depending upon certain criteria like:
- In case the turnover of the business is not more one ₹1.5 crore, there is no requirement to adopt the mandates pertaining to these codes.
- If the turnover of the business is up to ₹5,00,00,000, such businesses are required to adopt a 4 digit HSN code for its business.
- In case the turnover of the business is more than ₹5,00,00,000, such businesses are required to adopt a 6 digit HSN Code for its business.
Failure to comply with the mandate of applying the HSN code on GST bills will make the bill invalid.
Structure of HSN Code
The HSN module provides the classification of the commodities into various sections and chapters. There are 21 Sections and 99 Chapters. Each chapter contains a specific category of goods or commodities. The chapters are further divided into headings and subheadings and tariff items. There are 1244 headings and 5244 sub-headings. If this code is an 8 digit structure, the first 2 digits of the code give an idea about the chapter; the next digits put into the heading the 5th and 6 digits pertain to the sub heading and the next 2 digits pertain to the tariff rates.
The sections and the chapters broadly describe the categories of the goods and commodities, and the headings and subheadings provide the description of the product in detail.
The World Customs Organization established the Harmonised System of Nomenclature, which is a globally recognised structure classify and identify goods globally in both the domestic and foreign market. These codes were earlier applicable only for the central excise and customs but posted the implementation of GST in India, imports and exports standardised codes and these codes, which are globally accepted, have also been adopted in India. If this code is an 8 digit structure, the first 2 digits of the code give an idea about the chapter; the next digits put into the heading, the 5th and 6 digits pertain to the sub heading and the next 2 digits pertain to the tariff rates.
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