Harmonised System of Nomenclature (Hsn) Code

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Government has made mandatory that a GST taxpayer having turnover of more than 5 crore rupees in the preceding financial year will have to furnish 6 digits Harmonised System of Nomenclature HSN Code, or Service Accounting Code, SAC from April 1, 2021 on the invoices issued for supplies of taxable goods and services.

Important points:

• A taxpayer having turnover of uptoRs 5 crore in the preceding financial year is required to mandatorily furnish 4 digits HSN code on B2B invoices. Earlier, the requirement was 4 digits and 2 digits.
• HSN codes for goods at 6 digits are universally common. Therefore, common HSN codes apply to Customs and GST. HSN search facility is available on the GST portal.
• Manufacturers and importers or exporters have been commonly using HSN Codes.
• A large number of GST taxpayers are already furnishing HS codes or SAC at 6 or 8 digits on voluntary basis on the invoices, e -way bills and GSTR 1 returns.

What does the HS code mean?

• It is a six-digit identification code. Of the six digits, the first two denote the HS Chapter, the next two give the HS heading, and the last two give the HS subheading.
• Developed by the World Customs Organization (WCO).
• Called the “universal economic language” for goods.
• It is a multipurpose international product nomenclature.
• The system currently comprises of around 5,000 commodity groups.
• HS Code is also known as HSN Code in India. Goods are classified into Harmonized System of Nomenclature or HSN. It is used up to 8 digit level.
• HSN classification is widely used for taxation purposes by helping to identify the rate of tax applicable to a specific product in a country that is under review. It can also be used in calculations that involve claiming benefits.

HS code are used by Customs authorities, statistical agencies, and other government regulatory bodies, to monitor and control the import and export of commodities through:

1. Customs tariffs
2. Collection of international trade statistics
3. Rules of origin
4. Collection of internal taxes
5. Trade negotiations (e.g., the World Trade Organization schedules of tariff concessions)
6. Transport tariffs and statistics
7. Monitoring of controlled goods (e.g., wastes, narcotics, chemical weapons, ozone layer depleting substances, endangered species, wildlife trade)
8. Areas of Customs controls and procedures, including risk assessment, information technology and compliance.

Significance:

• Over 200 countries use the system as a basis for their customs tariffs, gathering international trade statistics, making trade policies, and for monitoring goods.
• The system helps in harmonising of customs and trade procedures, thus reducing costs in international trade.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT