What is HSN Code
If you are a business owner in India, you are likely familiar with the Goods and Services Tax (GST). The GST is an indirect tax introduced in India in 2017 and is charged on the supply of goods and services. Every product or service that is sold must have a unique HSN (Harmonized System of Nomenclature) code, which is used to determine the applicable GST rate.
It is a numeric code that exhibits a systematic classification of various products. It is a legal mandate for B2B and B2C tax invoices on the supply of goods and services. Taxpayers having a turnover of more than ₹ 5 crores in the preceding financial year should furnish a four-digit HSN code on every B2B invoice. There are approximately 5,000 commodities divided into small groups arranged in a legal and logical structure. Its purpose is to bring a uniform classification of products and facilitate international trade.
How to Add the HSN Code On the GST Portal?
Login to the GST Portal
To begin with, you need to log in to the GST portal using your credentials (username and password). Once you have successfully logged in, Log in to the GST portal using your valid credentials. You will be taken to the dashboard.
Navigate to Services
From the dashboard, you need to select ‘Services’ and go to “User Service.”
Add HSN Code
Click on ‘HSN/SAC Masters’ and then select the ‘Add HSN/SAC’ option.HSN codes are used for goods, while SAC codes are used for services. Click on the appropriate HSN Code based on what you need to add.
Enter HSN/SAC Code Details
You’ll need to input the details of the HSN code. This will involve completing the following fields:
Enter the six-digit HSN code for the product or service that you are adding. You can leave this field blank if the product or service does not have an HSN code.
Enter a brief Specification of the product or service that you are adding.
Select the applicable GST rate for the product or service that you are adding. The GST rates are 0%, 5%, 12%, 18%, and 28%
Save HSN Code
Once you have entered all the required details, click the ‘Save’ button. Your new HSN code will now be added to the HSN/SAC master.
Review and Verify the HSN/SAC Code and GST Rates
It is crucial to verify that the HSN code that you have added is correct. You can do this by going to the ‘Search HSN/SAC’ option under the ‘HSN/SAC Masters’ section. Enter the HSN code you have added and click the ‘Search’ button. If the HSN code is correct, it will be displayed along with the description and GST rate that you have entered.
What is the Importance of HSN Code
The purpose of HSN codes is to make them globally accepted. HSN codes remove the need to upload a detailed description of the goods. It is time-saving and makes filing easier since GST returns are automated.
A Goods seller or a service provider must provide HSN/SAC-wise summary of sales in his GSTR-1 if his turnover is above the threshold Limit.
Click here to read more about How to check HSN Code.
Points to Consider while Adding HSN Code
Choose the Codes Wisely
Ensure you are vigilantly searching and using the correct HSN code for each product or service you are adding. The HSN code is a six-digit code that classifies goods and services based on their nature, type, and use. Using the wrong HSN code can result in incorrect GST rates being applied, which can lead to legal issues.
HSN codes should be up to date
It is vital to keep your HSN codes up to date, as the GST rates for certain products and services may amend over time. If the GST rate for a particular product or service changes, you will need to update the HSN code in the GST portal to reflect the new rate.
Document HSN codes
Finally, it is essential to keep accurate records of the HSN codes for all your products and services. This will make it easier to update the future HSN codes and help you track your tax liabilities and comply with GST regulations.
The Bottom Line
Incorporating an HSN code into the GST portal is a relatively simple procedure that requires only a handful of easy-to-follow steps. By appropriately choosing the correct codes of HSN for all your Goods and services, you can confidently apply the accurate GST rate, sidestep potential fines or legal entanglements, and ensure smooth business operations.
Do you need help Finding Your Products or service HSN or SAC code? CaptainBiz is the ultimate GST billing software that helps you provide the same and also Provides simple invoicing, real-time inventory management, and cost reduction, allowing you to grow your business seamlessly.
Frequently Asked Questions
- What are the rules for HSN code?
HSN Codes are typically 6-digit codes. However, in India, we have 8-digit HSN codes where the first two digits represent the chapter number, the next two digits represent the heading number, the following two digits comprise the sub-heading, and the last two digits are the tariff item.
- What happens if HSN code is wrong?
Penalty for Non-Compliance
Every Taxpayer needs to report the correct HSN/SAC Code on Tax Invoices and GSTR-1.
The penalty of Rs 50000 ( Rs 25000 under CGST and Rs 25000 under SGST) would be levied for non-mentioning of HSN/SAC or wrong mentioning of HSN/SAC in GST Returns and Tax Invoices.
- Can we add HSN code later?
Yes, you can add HSN codes for products or services that are exempt from GST. However, you must specify that the GST rate is 0% when adding the HSN code to the GST portal.