What Is Hsn Code? How Does Hsn Code Work

The HSN code stands for the Harmonic System of Nomenclature, which was implemented by WCO (World Customs Organization) in 1988.

HSN, or HS (Harmonic System of Product Description and Coding), is an international, multipurpose product nomenclature developed by the World Customs Organization (WCO). HSN is an internationally recognized code system which allows for product classification worldwide. The main goal of the HSN coding is to classify products in a systematic way, it can also be used to collect all data and sort out any problems there are.

This system has been introduced to systematically classify goods worldwide. Almost all goods in India are classified using HSN class codes, facilitating use of HSN numbers to calculate the Goods and Services Tax (GST). HSN codes and SAC codes are used for classification of goods and services in GST regime. These HSNs and SAC codes help businesses identify correct applicable GST rates for a particular goods and services. Moreover, these HSN and SAC codes were used on invoices and records, so that it is easy to identify goods and services offered. A SAC code is similar to the way the nomenclature works in an HSN, but is used for services. On the tax bill, minimum, you need to display the HSN codes in the form of 4 digits for goods and services. In the case of import/export, eight-digit HSN codes should be mandatory, since the GST is expected to be compliant with international standards and practices. Those who had a turnover up to Rs5 crore in the preceding financial year will also be required to provide HSN codes of four digits in B2B invoices. The HSN stands for Harmonised System of Nomenclature codes. Businesses with turnover between Rs 1.5 to Rs 5 crore are using two-digit HSN codes for their goods.The HSN codes consist of 21 sections. HSN codes for services and products are mostly used for determining tax slabs of each good or service, precisely.

HSN codes eliminate the need for data inputs on a product, making it easier to file a GST return. Manufacturers, importers, and exporters have been using HSN codes for some time. With the shift of India to GST came a shift towards online taxation and the adoption of HSN codes for classifying goods for taxation. All goods and services that are meant for GST in India are classified with the help of an HSN (Harmonised System of Nomenclature) code and with SACs (Service Accounting Codes) code, which would help remove barriers/hindrances to international trade. This impressive adoption rate may continue to be translated into benefits from HSN codes including- Collection of data on international trade, Provision of a rational basis for customs duties, Uniform Classification, Classification of approximately 98% of international traded goods under the HSN. When the merchant issues a bill of sale of goods and services, it is necessary for him to quote HSN/SAC codes on his bill, based on his businesss overall turnover.

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