HSN Code effective from 1st April 2021

Harmonized System of Nomenclature, shortly and popularly known as HSN, is a system via which goods are classified under Goods and Services Tax. Provisions relating to mentioning of

HSN code in GST invoice is covered under the first proviso to rule 46 of the Central Goods and Services Tax Rules, 2017. The category of taxable person required to specify the HSN code in the GST invoice was initially prescribed under notification no. 12/2017- Central Tax dated 28th June 2017. However, recently, vide notification no. 78/2020- Central Tax dated 15th October 2020, the prescribed criteria were amended. The present article covers both the erstwhile provisions and new provisions which are going to be effective from 1st April 2021.

Provisions governing HSN code specification under GST invoice

As per rule 46(g) of the Central Goods and Services Tax Rules, 2017, the

tax invoice should contain HSN code for goods or services. Further, the proviso to the rule states that-

Mentioning of the number of digits of HSN code in the tax invoice will be specified by issuing notification; and
Exemption available to specified registered person will also be specified by way of notification.

Erstwhile provisions of HSN code

The specification of HSN code in the GST invoice was initially introduced vide notification no. 12/2017- Central Tax dated 28

th June 2017. As per the provisions, mentioning/ non-mentioning of digits of HSN code depends on the annual turnover of the registered person in the preceding financial year. Following table briefly explains the HSN code requirement-

Particulars	Number of digits of HSN code to be mentioned in the GST invoice
The registered person having annual turnover up to INR 1.50 Crores in the preceding financial year	NIL
The registered person having annual turnover more than INR 1.50 Crores and up to INR 5 Crores in the preceding financial year	2 digits
The registered person having annual turnover more than INR 5 Crores in the preceding financial year	4 digits

Notably, the above provisions are applicable from 1

st July 2017 to 31st March 2021.

New provisions of HSN code applicable from 1st April 2021

The Central Board of Indirect Taxes and Customs, vide notification no. 78/2020- Central Tax dated 15

th October 2020, amended the earlier provisions. Accordingly, the new provisions are effective from 1st April 2021. Following table briefly explains the new provisions of HSN code-

Particulars	Number of digits of HSN code to be mentioned in the GST invoice
A registered person having an aggregate turnover up to INR 5 Crores in the preceding financial year	4 digits
A registered person having an aggregate turnover more than INR 5 Crores in the preceding financial year	6 digits

In nut-shell, from 1

st April 2021, all the registered persons are required to comply with the requirement of HSN coding. However, if both the below conditions are satisfied, the registered person is not required to mention HSN code in the specific tax invoice- Condition 1 – The registered person is having an aggregate turnover up to INR 5 Crores; and Condition 2 – The supply, for which the tax invoice is issued, is made to an unregistered person.

HSN code for specified goods

Vide notification no. 90/2020-Central Tax dated 1

st December 2020, the Central Board of Indirect Taxes and Customs inserted new proviso to rule 46 of the Central Goods and Services Tax Rules, 2017. As per the new insertion, the registered person issuing tax invoice for the following HSN code (all are chemical goods) is required to mention eight digits of HSN code in the tax invoice- 38249100; 29313100; 29313200; 29313600; 29313700; 29313500; 29313300; 29313400; 29313800; 29181700; 29211200; 29211300; 29211400; 29221800; 29306000; 29307000; 29309092; 29333930; 29313900; 38249900; 39072090; 39119090; 38249900; 28121100; 28121200; 28121300; 28121400; 28111200; 29202300; 29202400; 29202100; 28121500; 28121600; 28121700; 29221720; 29221710 and 29221500.

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Frequently Asked Questions

Common questions about HSN Code Specification in GST Invoice from April 2021.

A: The HSN code is a system used to classify goods under the Goods and Services Tax (GST) regime. It is mandatory to mention the appropriate HSN code on GST tax invoices, as it helps in identifying the goods for tax purposes and ensuring proper tax compliance.

A: From April 1, 2021, all registered persons, regardless of their aggregate turnover, are required to mention the HSN code in their GST tax invoices. However, there is an exception for registered persons with an aggregate turnover up to INR 5 crores, when issuing invoices to unregistered persons.

A: The number of digits of the HSN code to be mentioned on the GST tax invoice depends on the registered person's aggregate turnover in the preceding financial year. Registered persons with an aggregate turnover up to INR 5 crores need to mention 4 digits, while those with an aggregate turnover above INR 5 crores need to mention 6 digits of the HSN code.

A: Yes, the registered person issuing a tax invoice for certain specified chemical goods (with HSN codes listed in the notification) is required to mention 8 digits of the HSN code, irrespective of their aggregate turnover.

A: Prior to April 1, 2021, the requirement for mentioning the HSN code on GST tax invoices was based on the registered person's annual turnover in the preceding financial year. Registered persons with an annual turnover up to INR 1.5 crores were not required to mention the HSN code, while those with an annual turnover between INR 1.5 crores and INR 5 crores had to mention 2 digits, and those with an annual turnover above INR 5 crores had to mention 4 digits of the HSN code.

A: Mentioning the correct HSN code on GST tax invoices is crucial for proper tax compliance and accurate identification of the goods for tax purposes. It helps in determining the applicable tax rates, facilitating tax collection, and maintaining transparency in the GST system.

A: Yes, non-compliance or incorrect mentioning of the HSN code on GST tax invoices can attract penalties under the GST laws. It is essential for registered persons to ensure accurate and complete disclosure of the HSN code to avoid any legal consequences.

A: Registered persons can refer to the HSN code master list provided by the GST authorities, which classifies goods into different categories and assigns specific HSN codes. They can also seek guidance from tax professionals or consult the relevant GST rules and notifications for accurate classification and HSN code determination.

A: Yes, the GST authorities may revise or update the HSN code requirements periodically based on the evolving tax regime and industry needs. Registered persons should stay updated with the latest notifications and amendments to ensure compliance with the current HSN code requirements.

A: Mentioning the HSN code on GST tax invoices is an ongoing requirement and not a one-time exercise. Registered persons need to ensure that the correct HSN code is mentioned on every GST tax invoice issued, as per the applicable guidelines and their aggregate turnover in the preceding financial year.