What is an HSN Code?

HSN code is the abbreviation for “Harmonised System of Nomenclature”. This type of system was basically industrialized and introduced by the World Customs Organisation (WCO) in the year 1988. The international HSN code has been implemented in India for the purpose of systematically classifying various goods and services to the rest of the world.

Typically, the HSN code consists of a 6-digit code, which is uniform and classifies more than 5,000 products that are accepted all over the world in the form of exports and imports. Over the years, many revisions have been implemented throughout the globe and the HSN code is currently used by 150 countries.

HSN Code and its Structure

The HSN code was introduced by WCO, having a 6-digit number, which is further comprised of two numbers each for the commodities. The World Customs Organisation (WCO) has introduced a criterion, in which the 6-digit at the beginning of the HSN code cannot be altered. However, it is possible to change only the last 4-digit and is only changed by the customs authority. The last 4 digits in the HSN code are used for the identification of Regional tariff and National tariff.

Thus, the two numbers each contained in the HSN code are for:

* National Tariff
* Regional Tariff
* Chapter (there are 99 chapters under the HSN module)
* Heading (there are 1244 headings under chapters)
* Sub-heading (there are 5224 sub-headings under the heading)

Importance of International HSN Code

The HSN code gives the standardization and global acceptance of the goods. Under the GST regime, it is quite important for all the commercial enterprises on which the HSN system is relevant to get an HSN code with a purpose to levy the proper price of taxes on the set by way of the concerned government of India.

At present, the international HSN code has a 6-digit code that identifies or explains commodities of more than 5,000 groups. This international code is arranged in a logical structure and is bound by legal rules and regulations. Also, the HSN code is well-supported by rules that help achieve the uniform classification of the goods. This is important from the point of view of facilitating trade internationally.

The international HSN code is used by over 150 countries for the following major reasons:

* Uniform classification of goods
* Creating a base for customs tariffs
* International trade statistics collection

More than 90% of the goods/commodities that are traded on a global scale are generally classified in terms of the international HSN code. The HSN code for each good traded internationally is also accepted by several countries and often remains the same for almost all commodities.

How is HSN Code Applied in India

There are certain criteria on which the HSN system depends on. They are mentioned below:

* HSN code is not mandated to commercial enterprises that make an annual turnover which is not more than Rs. 1.5 crores. Any company whose turnover is more than 1.5 crores INR but less than 5 crores INR shall apply 2 digit HSN code.

* HSN code is needed when any business has a turnover of more than 5 crores rupees.

* Any business who is into export and import, irrespective of turnover shall use 8 digit HSN code.

Services Accounting Code (SAC) in GST

Similar to commodities, services can also be classified uniformly for recognition, measurement, and taxation. And such codes for services are usually termed as Services Accounting Code (SAC).

For example:
Services Accounting Code or SAC is used in various legal documentation and certification services concerning patents, copyrights, and other intellectual property rights. The SAC for such legal documentation can be 998213, where:

(i) The first two digits are same for all services i.e. 99.
(ii) The next two digits (i.e. 8 and 2) represent the major nature of service, in this case, legal services.
(iii) The last two digits (i.e. 1 and 3) represent detailed nature of service, such as legal documentation for patents, etc.

HSN Code For GST in India

HSN code used for items in India after GST implementation is mandatory for all taxpayers. HSN code is required to identify goods that are supplied in India because earlier, there was not any standard system that could be implemented for identifying commodities. However, now there is a standard system that is implemented with GST in India and can be used to identify commodities for transportation of goods from one place to another with the classification of each merchandise.

There is also an essential implementation of the HSN code which helps keep track of records, data, and analytics of the goods that are traded internationally. In order to levy fair GST rates in India, correct HSN code or SAC is necessary, especially during return filing. And this will guarantee an inlined conformity with the new GST rules and regulations.

HSN Code List and GST Rate Finder

The Indian Taxation System has categorized over 1,200 goods that have GST levied under 6 broad categories, also known as “tax slabs”. The different tax slabs that have been categorized are made of 0 percent (or No Tax), 5 percent, 12 percent, 18 percent, and 28 percent, respectively. It is very important to know in which category your product or good has been classified. It is possible to find the category of your product by using the search utility that is provided to help make things easier and quicker.

If you would like to use the GST rate finder tool then surely you will easily be able to do so, which can be used to quickly find the HSN code for the goods or products for invoicing purposes.

By going through the international HSN code list, it will be clear that each commodity traded is assigned with a 6-digit code, which is unique in nature. In India, there are another two digits that are added to this 6-digit HSN code, which is used for the purpose of further classification of the goods.

The purpose of the HSN code can be well explained through the help of an example. All in all, there are 21 sections that are comprised of 99 chapters divided into 1244 headings and 5224 sub-headings. So, let us take 09024020, which is the code for coffee beans sold in bulk, where 09 is the Chapter, 02 is the heading, and 40 is the product code for the coffee beans. The last 2 digits of 20 is code allotted by the Indian taxation system for the coffee beans sold in bags and in bulk. Thus, if it were coffee bean bags, then the ending two digits of the HSN code would have been changed with 40 in preference to 20.

Below you can look at a list of HSN code for groups of goods that are exported to various countries:

Section 1: Live Animals, Animal Products

Section 2: Vegetable Products

Section 3: Vegetable Fats or Animal and prepared edible fats, oils and their cleavage products, and, Animal or Vegetable waxes

Section 4: Prepared Beverages, Spirits, Foodstuffs, and Vinegar, Tobacco, and Manufactured Tobacco Substitutes

Section 5: Mineral Products

Section 6: Product of the allied Industries or chemicals

Section 7: Rubber and articles thereof and Plastics and articles thereof.

Section 8: Leather, Furskins and raw hides and skins, and articles thereof, saddlery and harness, travel goods, handbags and similar containers, articles of animal gut (other than silkworm gut).

Section 9: Wood charcoal, Cork and articles of cork, and wood and articles of wood, Manufacturers of straw, of Esparto or of other Plaiting Materials, Basketwork, and Wickerwork.

Section 10: Fibrous Cellulosic Material and pulp of wood, Recovered ( Waste and scrap ) paper or paperboard, paper and paperboard and articles thereof.

Section 11: Textile and textile articles.

Section 12: sun umbrellas, walking-sticks, Footwear, headgear, umbrellas,seat-sticks, whips, riding-crops and parts thereof, prepared feathers and articles made therewith, articles of human hair and artificial flowers,

Section 13: stone, plaster, cement, Articles of asbestos, mica, or similar materials, ceramic products, glass, and glassware.

Section 14: Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, and articles thereof, Imitation Jewellery and Coins.

Section 15: articles of Base Metal and Base Metals

Section 16: Machinery and mechanical appliances, electrical equipment, parts thereof, sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such article.

Section 17: Aircraft, Vessels, Vehicles, and Associated Transport Equipment

Section 18: cinematographic, measuring, Optical, photographic, checking, precision, medical or surgical instruments and apparatus, clocks, and watches, musical instruments, parts, and accessories thereof.

Section 19: parts and accessories and arms and ammunition, thereof

Section 20: Miscellaneous Manufactured Articles

Section 21: Collectors’ pieces and antiques and works of art

Conclusion

Thus, you will surely want to know more about HSN and SAC codes with tax rates for your business product or service which you are supplying to your customers. We will provide you some useful links, where you can easily find HSN code and SAC.

Central Board of Indirect Taxes and Customs Goods and Services Tax

Visit the website for more information: https://www.cbic-gst.gov.in/gst-goods-services-rates.html