Introduction

The Harmonized System of Nomenclature (HSN) designations serve as a standardized product classification system essential to international trade. The World Customs Organization (WCO) created and maintained HSN codes with alphanumeric identities linked to various commodities, enabling a smooth international exchange of traded goods. These identifiers, which usually consist of six digits, facilitate effective communication between commercial partners, improve transparency, and expedite customs operations. HSN codes are a crucial part of the tariff and customs environment since they help with precise classification, guaranteeing that every product is recognized consistently throughout borders. Businesses involved in international trade must have a basic understanding of HSN codes since they affect regulatory compliance, customs duties, and cross-border operations’ effectiveness.

What is an HSN Code?

HSN code is the short form of the Harmonized System of Nomenclature. It is a system which is applied all across the world for systematic classification of goods. It is a six-digit uniform code for over 5000 products, accepted globally. It has been in effect since 1988 when WCO, or the World Customs Organization, first introduced it.

What is the Importance of HSN Code?

India and other countries globally have been using HSN Codes for an extended period. However, after implementing GST in India, HSN and globally recognized import and export codes have also been embraced. Besides the systematic classification of goods, the HSN code’s most essential purpose is to simplify the customs process and minimize cost. Moreover, these HSN codes also assist the taxpayers in knowing and understanding the GST rates associated with a particular commodity. Hence, the government has made writing the HSN codes in the GSTR forms mandatory.

HSN Code Current Requirements

Effective the 1st of April 2021, the CBIC has changed how the HSN codes will be reported in the GSTR forms. The table below will help you understand the requirements:

Sr. no.	Annual Turnover (in the preceding financial year)	HSC Code digits
1	Up to INR 5 crores	B2B tax invoices – 4 digits (mandatory) B2CS tax invoices – 4 digits (optional)
2	More than INR 5 crores	B2B and B2CS tax invoices – 6 digits (mandatory)

Explanation of HSN Codes – Understanding its Structure

To understand how HSN code works, it is necessary to know its structure. Let’s look at it below:

• There are a total of 21 sections overall in HSN codes.
• These 21 sections are further divided into 99 chapters. These chapters are specific to a category of product.
• All these 99 chapters are later classified as headings, sub-headings and tariff items.
• If the HSN code is for eight digits – the first two digits will be the chapter, 4th digit will be the heading, the sixth digit will be the subheading, and 8th digit will be the tariff items.

Example of HSN Code

Here is an example of a vegetable identified and classified as per HSN codes: In the above example, the first two numbers or digits- 07 describe vegetables (chapter). The following two (03) digits describe which vegetable (heading). The following two (10) are the sub-headings referring to the various options within the main heading. Finally, the last (10) refers to the tariff items, which are fresh or chilled onions.

HSN Code and Product Identification

Let’s look at the different HSN Codes associated with the various products for your reference and understanding. These are listed under various chapters, along with their product classification, which will be helpful in the GST filing.

Chapter	Product Classification
Chapter 1	Live animals and poultry
Chapter 2	Animal meat and edible offals
Chapter 3	Fish, filets, and other aquatic animals meat
Chapter 4	Honey, eggs, and dairy products
Chapter 5	Inedible animal products
Chapter 6	Flowers, live trees and plants
Chapter 7	Vegetables
Chapter 8	Fruits
Chapter 9	Tea, coffee, spices
Chapter 10	Cereals and grains
Chapter 11	Milling industry products
Chapter 12	Medicinal plants, seeds, and fruits
Chapter 13	Lac, gums, resins, vegetable SAP and other extracts
Chapter 14	Vegetable products and materials
Chapter 15	Oils, fats, vegetables, and animal products
Chapter 16	Fish and aquatic vertebrates meat (Prepared/Preserved)
Chapter 17	Sugar, sugar confectionery, and bubble gums
Chapter 18	Cocoa and cocoa products
Chapter 19	Pastry, waffle, pizza, breads
Chapter 20	Fruits, jams, juices, and jellies
Chapter 21	Tea, coffee, and other edible preparations
Chapter 22	Spirit and vinegar, non-alcoholic beverages
Chapter 23	Residual starch products, meals, and pellets
Chapter 24	Tobacco and its products
Chapter 25	Salts and marbles
Chapter 26	Mineral ores and concentrates
Chapter 27	Coal, petroleum, and other fossil fuels
Chapter 28	Gasses and inorganic chemicals
Chapter 29	hydrocarbons
Chapter 30	Blood and pharma products
Chapter 31	Fertilizers and unspecified products
Chapter 32	Coloring and Tanning products
Chapter 33	Cosmetics and oils
Chapter 34	Soaps and waxes
Chapter 35	Glues and enzymes
Chapter 36	Industrial explosives and fireworks
Chapter 37	Photographic and cinematographic goods
Chapter 38	Chemical and clinical waste
Chapter 39	Plastic products
Chapter 40	Rubber and rubber products
Chapter 41	Skins and rawhides
Chapter 42	Leather products – bags, handbags and wallets
Chapter 43	Raw and artificial fur products
Chapter 44	Wood products and wood charcoal
Chapter 45	Natural and shuttlecock cork
Chapter 46	Basketware of esparto or other  plaiting materials; wickerwork and manufacturers of straw
Chapter 47	Wood pulp
Chapter 48	Paper, newsprint, paperboard
Chapter 49	Newspaper, printed books, and postal goods
Chapter 50	Silk
Chapter 51	Fine wool or coarse animal hair; woven fabric and horsehair yarn
Chapter 52	Cotton
Chapter 53	Paper yarn and it’s woven fabrics and other vegetable textile fibers
Chapter 54	Man-made filaments
Chapter 55	Man-made staple fibers
Chapter 56	Cables, ropes, felt and nonwovens, cordage, wadding, special yarns, twine, and articles thereof
Chapter 57	Textile floor covering and carpets
Chapter 58	Lace, fabric and tufted textile, trimmings, tapestries, embroidery
Chapter 59	Special woven fabrics, coated and laminated textile fabrics
Chapter 60	Knitted or crocheted fabrics
Chapter 61	Accessories of clothing knitted or crocheted and articles of apparel
Chapter 62	Clothing accessories that are not knitted or crocheted & articles of apparel
Chapter 63	Other textile articles, sets, worn clothing and rags, worn textile articles
Chapter 64	Footwear, gaiters, and parts of such articles
Chapter 65	Headgear parts
Chapter 66	Walking sticks, umbrellas, and accessories
Chapter 67	Artificial flowers, wigs, and false beards
Chapter 68	Plaster, cement, construction materials, and mica
Chapter 69	Ceramic products and bricks
Chapter 70	Glass and glassware products
Chapter 71	Silver, gold, diamonds, and other valuable metals
Chapter 72	Steel, iron, iron rods, and non-alloy products
Chapter 73	Iron tubes, railway tracks, nails, containers, needles, and sanitary wares
Chapter 74	Copper and copper alloy products
Chapter 75	Nickel and nickel alloy products
Chapter 76	Aluminum and aluminum products
Chapter 77	Not specified and reserved for future
Chapter 78	Sheets, lead, and lead foils
Chapter 79	Zinc dust, bars, and sheets
Chapter 80	Tin bars, tin, and profiles
Chapter 81	Cobalt, magnesium, bismuth, and other base metals
Chapter 82	Cutlery, agricultural tools, knives and razors
Chapter 83	Padlocks, bells, safe deposit lockers, and base metal products
Chapter 84	Industrial tools and machinery
Chapter 85	Electronic and electrical products
Chapter 86	Locomotives and railway machinery
Chapter 87	Motor vehicles
Chapter 88	Satellites, aircraft, and parachutes
Chapter 89	Ships, boats, and cargo vessels
Chapter 90	Artificial organs, medical equipment, monitoring systems, photographic and cinematographic accessories, lenses, and optical fibers
Chapter 91	Clocks and watches
Chapter 92	All musical instruments
Chapter 93	Army and military weapons
Chapter 94	Furniture, lighting, and household products
Chapter 95	Sports goods, electronic toys, and gaming consoles
Chapter 96	Pencils, pens, educational equipment, and smoking pipes
Chapter 97	Arts and antiques
Chapter 98	Passenger bags, project imports, and laboratory chemicals
Chapter 99	Services

Bottom Line

In summary, the smooth operation of customs and international commerce operations depends on the functionality of HSN codes. HSN codes facilitate unambiguous communication about the type of commodities being exchanged by offering a defined, hierarchical classification system. These standards’ methodical approach streamlines the customs process, improves openness, and guarantees uniformity in calculating taxes and charges. Companies that do business internationally need to understand the importance of HSN codes since proper categorization helps with regulatory compliance and speeds up cross-border transactions. As a developing system, HSN codes are still essential for enabling practical and transparent international trade and encouraging a uniform method of classifying commodities in the world market. Also Read: Reporting HSN Codes In GSTR – 9: Procedure Requirements And Penalties New GST Rates 2023 – List Of Latest Goods And Service Tax Rates Slabs GST Rates And SAC Code On Construction Services

FAQs

• Is there any rule regarding the HSN code?

All taxpayers with a turnover of INR 5 crores must write 4-digit HSN codes in the GSTR forms.

• What will happen if someone enters an incorrect HSN code?

Every taxpayer must record the correct HSN code on their tax Invoices and GSTR-1. It is essential to mention the HSN correctly in GST returns and tax invoices to avoid a penalty of Rs 50000 (Rs 25000 under CGST and Rs 25000 under SGST).

• What does the eight-digit HSN code mean?

An HSN code’s chapter is determined by its first two digits, headings at the four-, subheadings at the six-, and tariff items at the eight-digit positions.

• How are the different products classified as per HSN codes?

Every chapter has an HSN number that is two digits long. Every two-digit HSN number is subclassified to produce a four-digit HSN code. These four-digit HSN codes are subsequently further subdivided into six-digit HSN codes.

• Who needs to use HSN codes?

Every taxpayer with an annual turnover of over five crores must use HSN codes in their GST returns.

• Are there any HSN codes that are GST-free?

Yes, many HSN codes are free under GST.

• Can there be two products with the same HSN code?

Indeed, it is feasible for two objects to share the same codes under the HSN code system.

• Is it a mandate for taxpayers to mention the HSN code in their GST invoice?

All taxpayers with B2B invoices of more than Rs. 5 crores must mention the HSN code in their GST invoice.

• Is the ITN and HSN code the same?

ITN, or the Indian trade classification or Indian tariff code, are the last two digits of the 6-digit HSN code.

• Who assigns the HSN code?

The World Customs Organization (WCO) updates and manages the HSN every five years.