HSN Full Form and Meaning(Harmonized System of Nomenclature)
HSN full form is “Harmonized System of Nomenclature”. This system has been introduced for the systematic classification of goods all over the world. HSN code is a 6-digit uniform code. It was developed by the World Customs Organization (WCO) and it came into effect from 1988.
“Harmonized System of Nomenclature” or HSN comprises about 5,000 commodity groups; each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.
HSN Code understanding :
The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.
Each Section is divided into Chapters.
Each Chapter is divided into Headings.
Each Heading is divided into Sub Headings.
Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail.
Example: HSN Code 420310
42: Chapter Number which describes Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silkworm gut)
03: Heading Number which describes Articles of apparel and clothing accessories, of leather or of composition leather.
10: Subheading Number which describes Articles of apparel.
2 more digits for a deeper classification.
HSN Code 42031010 is for Jackets and jerseys.
HSN Code 42031090 is for Articles of apparel and clothing accessories, of leather or of composition leather- Articles of apparel-Other.
What is Services Accounting Code (SAC)?
Like goods, services are also classified uniformly for recognition, measurement and taxation. Codes for services are called Services Accounting Code or SAC.
The first two digits are same for all services i.e. 99
The next two digits (54) represent the major nature of service i.e. Construction services in this case.
The last two digits (11) represent detailed nature of service i.e. Construction services of single dwelling or multi dwelling or multi-storied residential buildings.
Similarly, 995412 is for Construction services of other residential buildings such as old age homes, homeless shelters, hostels etc.
HSN Code in GST
HSN codes to be declared up to 31st March 2021:
|Turnover||No. of digits of HSN to be declared|
|Upto 1.5 crore||0|
|1.5 crore- 5 crore||2|
|More than 5 crore||4|
HSN codes to be declared from 1st April 2021:
HSN Code Mandatory for Goods & Services on Tax Invoices w.e.f.1st April 2021
Notification No. 12/2017-Central Tax dated June 28, 2017, as amended vide Notification No. 78/2020 – Central Tax, dated October 15, 2020, mandates taxpayers to declare HSN Code (Harmonized System of Nomenclature)/ SAC (Services Accounting Code) on raising of tax invoices, w.e.f. April 1, 2021.
|S.No.||Aggregate Turnover in the preceding Financial year||Number of Digits of HSN Code|
|1||Upto INR 5 crores||4|
|2||More than INR 5 crores||6|
Aggregate Turnover up to INR 5 crores in the preceding financial year
HSN Code of 4 digit is mandatory for all the B2B tax invoices and optional for B2C tax invoices on supplies of Goods & Services.
Aggregate Turnover more than INR 5 crores in the preceding financial year
HSN Code of 6 digit is mandatory for all tax invoices( B2B & B2C) on supplies of Goods & Services.
Clarification on reporting 4-digit/6-digit HSNs dated 12th April, 2021
Taxpayers may, therefore note that based on the harmonious interpretation of the Notifications, as referred above, read with Customs Tariff Act, 1975, as made applicable to GST; the number of digits of HSN, as specified vide Notifications No.12/2017 & 78/2020 (Central Tax), are the minimum number of digits of HSN to be mentioned on the invoice.
Example: Where HSN 6 digits are specified to be reported in invoice, valid HSN codes as available in tariff, at both 6-digits and 8-digits can be mentioned. Similarly, where HSN at 4-digits are specified, valid HSN codes as available in tariff, at 4-digit, 6-digit and 8-digit can be mentioned. However, the 4/6 Digit HSN Codes, which are not available in the tariff; along with specific description, Unit and GST Rate; are not allowed to be mentioned.