The Harmonized System Nomenclature (HSN) Code is an internationally standardized system developed by the World Customs Organization (WCO) for the classification of goods. The primary objective of the HSN Code is to facilitate the smooth and uniform classification of products across countries, which helps in ensuring consistent and transparent trade practices globally.
Purpose and Importance of HSN Code
The HSN Code plays a pivotal role in international trade by providing a systematic and logical framework for classifying goods. This system helps in identifying products easily and applying the correct duties and taxes. The HSN Code also aids in the collection of international trade statistics and ensures compliance with global trade regulations. In domestic contexts, particularly under the Goods and Services Tax (GST) regime in India, the HSN Code helps in the standardized classification of goods for taxation purposes, thus simplifying tax compliance for businesses.
India has a HSN code with 8 digits.
For instance:
The HSN code for handkerchiefs made of textile materials is 62.13.90.10.
Here the first two digits (62) represent the chapter number for articles of apparel and clothing accessories that are not knitted or crocheted.
The next two digits (13) are the heading number for handkerchiefs.
The next two digits (90) are the product code for handkerchiefs made of textile materials.
The last two digits (10) are added for more classification and represent the tariff items. It might indicate if the handkerchiefs are made from man-made fiber.
The HSN code structure also represents the following:
From April 2021 on, mentioning HSN codes for goods and using SAC codes for services was mandated by the Indian government. Based on the transaction charges, the total number of HSN codes to be declared varies. Here is a clear outline for the same.
The HSN code is mandatory for GSTR forms. HSN codes provide clarity on GST rates for specific products, benefiting taxpayers. It is mandatory to mention the HSN number in the following cases:
You can easily find out the corresponding GST rates for your products using our HSN code finder in three easy steps:
Service Accounting Code or SAC are codes associated with services. Just like HSN codes are for goods and SAC is for services provided. These codes are issued directly by the Central board of indirect tax and are used to classify each and every service. It is crucial to mention SAC while generating invoices for service related transactions.
SAC code has 6 digits and is covered under chapter 99. All the SAC codes start with 99. Subsequently the four digits explains the nature of the service. For better understanding let us look at an example: