4/24/2017 HSNCODE:ConceptofHSNCodesUnderGST|TaxGuru

ConceptofHSNcodesunderGST

admin |GoodsandServicesTax 09Nov2015 201,093Views 118comments

CAVinodKaushik

WhatisHSNcode?

AsperWikipediatheHarmonisedCommodityDescriptionandCodingSystem,also
known as the HSN (Harmonised System Nomenclature) is an internationally
standardized system of names and numbers to classify traded products. These codes are
basicallyusedtofixrateoftaxonvariousproductsatthetimeofexportandimport.InIndian
context it is proposed to use HSN codes at invoice level to make taxation system of
international standard. Under GST supply invoices will be made by capturing hsn codes in
caseofgoodsandserviceaccountingcodesincaseofservices.

AlsoReadGSTEnrolmentHSNCodesExhaustiveList

HSNcodeof4digitsforgoods:

ThoughinternationallyHSNcodeisof68digitsbutinourcontextHSNcodeof4digitswillbe
mandatoryinitiallyfortaxpayershavingturnovermorethan5crore.Turnoverwillbetakenon
selfdeclarationbasisforISTyearandafterwardsturnoverofpreviousyearshallbeused.In
return form rate of tax shall be auto populated based on the HSN codes used in furnishing
invoicelevelpurchaseorsaleinformation.AftercompletingfirstyearunderGSTtheturnover
forpreviousyearwillbeconsideredasyardstickforusingHSNcodesof4digits.Theuseof
HSNcodesbelowitsstandardsistomakeGSTsystematicandgloballyaccepted.

HSNcodeof2digitsforgoods:

FortaxpayerswithturnoverbetweenRs1.5CroresandRs5Croresintheprecedingfinancial
year,HSNcodesmaybespecifiedonlyat2digitchapterlevelasanoptionalexercisetostart
with.FromsecondyearofGSToperations,mentioning2digitchapterlevelHSNCodewillbe
mandatory for all taxpayers with turnover in previous financial year between Rs. 1.5 Crores
and Rs. 5.0 Crores. HSN code at 2 digit will be little easy for taxpayers and make GST an
internationalcompatibletax.

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HSNcodesincaseofExportandImport:

HSNcodesat08digitswillbemandatoryincaseofexportandimports.TheGSTlawhasto
be compatible with international standards. The concept of HSN codes was invented outside
Indiaandsameisusedbyvariousmembercountries.Theaboveparameterswithrespectto
HSNcodeforgoodsandAccountingCodeforserviceswillapplyforsubmittingtheinformation
in return relating to relevant invoice level information for B2B supplies (both intrastate and
interstate)andinterstateB2Csupplies(wheretaxablevalueperinvoiceismorethanRs.2.5
lakhs).

BenefitsofHSNcodes:

Incasegoodsandservicesareidentifiedthroughtheiruniquecodesi.e.internationaltoothe
chances of misinterpretation are very low. Again the taxpayers are not required to submit
description of goods and services tax in return as the same is to be obtained from invoices
whicharemadeonthebasisofHSNcodesandaccountingcode.

Otherimportantobservations:

ThoughcertainlimitshavebeenfixedformandatoryuseofHSNcodesandserviceaccounting
codebutanytaxpayercanusetheseoptionallyifhedesires.Thesmallclassesofdealerswho
haveoptedcompositionschemeareevennotrequiredtouseHSNcodesof2digits.TheHSN
codewillbeusedincaseofgoodsandaccountingcodewillbeusedincaseofservices.

Closingcomments:

For all B2B transactions (Interstate and intrastate) invoice level specified details will be
uploadedi.e.everyinvoiceissuedbythetaxpayerswillformpartofGSTreturn.ForallB2C
transactionsitwillbemandatorytouploadinvoicewiseinformationifitexceeds250000/.The
level of compliance proposed in GST law seems very systematic but required enough
preparationforprofessionalsandtaxpayers.Atlastinmypersonalopinionthenationalimpact

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4/24/2017 HSNCODE:ConceptofHSNCodesUnderGST|TaxGuru

ofBiharassemblyelection(DefeatofPMModi)willbelittlenegativeforrolloutofGSTfrom01
042016.

(Authorcanbereachedatcavinodkumar67@gmail.com,+919953236278)

Disclaimer:Viewsexpressedarestrictlypersonal.Thecontentofthisdocumentaresolelyfor
informationalpurpose.Itdoesntconstituteprofessionaladviceorrecommendation.TheAuthor
doesnotacceptanyliabilitiesforanylossordamageofanykindarisingoutofinformationin
thisarticleandforanyactionstakeninreliancethereon.

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