HSN Code effective from 1st April 2021

HSN Code effective from 1st April 2021

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 28th 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-

ParticularsNumber 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 yearNIL
The registered person having annual turnover more than INR 1.50 Crores and up to INR 5 Crores in the preceding financial year2 digits
The registered person having annual turnover more than INR 5 Crores in the preceding financial year4 digits

Notably, the above provisions are applicable from 1st 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 15th 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-

ParticularsNumber 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 year4 digits
A registered person having an aggregate turnover more than INR 5 Crores in the preceding financial year6 digits

In nut-shell, from 1st 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 1st 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.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.