HSN Code: New rules
The Ministry of Finance recently announced that the businesses with annual turn over of more than Rs 5 crores will have to furnish six-digit HSN code on their tax invoices. The businesses with an annual turn over of less than five crores of rupees have to furnish four-digit HSN code. Previously, the requirement was four digits and two digits respectively.
What is HSN Code?
HSN is Harmonised System of Nomenclature. It was adopted by World Customs Organization in 1988. It is a six-digit code that classifies various products. India adopted the HSN coding system in 1986 (even before WCO) mainly to classify commodities for Customs and Central Excise.
- The HSN codes apply to both GST and Customs.
- It is used all over the world.
- HSN codes make the process of filing GST easy as they remove the need to upload details about the goods.
Understanding the HSN Code
The HSN code consists of 21 sections. Each section is divided into 99 chapters. Each chapter is divided into 1244 headings. Each heading is divided into 5,224 sub headings. India uses eight-digit HSN code.
- The first two digits of the HSN code denotes the chapter of the goods. It can be edible goods, non-edible goods, perishable goods, inflammable goods, etc.
- The next two digits in the HSN code denote headings in the chapter. This can be tomato, fish, petrol, etc.
- The rest of the code denotes the subheading. It can be chilled, fresh, dry, etc.
Who needs HSN code in India?
In India, the importers, exporters and manufactures have been using the HSN codes for a long time. Indian dealers with an annual turn over of less than Rs 1.5 crores need not adopt HSN codes for their commodities.
Significance of HSN code
More than 200 countries are using the HSN codes to gather international trade statistics, make trade policies and to monitor goods. Thus, the HSN system helps to maintain a harmonized trade procedure all over the world. It also helps to reduce the costs in international trade.
What is SAC HSN Code?
SAC Code is Services Accounting. The SAC HSN codes are issued by the Central Board of Indirect Taxes and Customs (CBIC). These codes are used in invoices generated for the services delivered.
In December 2020, the CBIC had made it mandatory to mention the eight digit HSN code in tax invoices for 49 chemical based products.
Category: Economy & Banking Current Affairs