The GST rolled out in India on July 1 and from then all the goods and services transacted in India are grouped under a single HSN code system or SAC Code system. The Goods are classified under HSN Code and the services are classified under SAC Code. Under these HSN and SAC Codes, GST rates have been fixed in five slabs, namely NIL, 5%, 12%, 18% and 28%.
What is HSN Code?
The HSN coding stands for “Harmonized System of Nomenclature” and also referred as Harmonized Commodity Description. The “HSN” is a multipurpose international product nomenclature developed by the World Customs Organization(WCO). It is to ensure that GST invoicing practices are in sink with the international trade standards of product nomenclature.
The HSN coding system is being used in more than 200 countries for custom tariffs. At present, over 98% of the merchandise in world trade is classified under HSN code. Thus Indian Government decided to adapt to the HSN coding system for classification of goods under GST.
Why is it necessary to use HSN Code?
Each and every business differs with goods and services they are dealing into. In this practice of declaration along with the GST code of those commodities, the system will automatically pick the tax rates under the GST regime based on the HSN Codes. Thus it is so important to mention the exact HSN Code of the commodity at the time of GST enrollment.
How to find GST Rates?
It is mandatory that you have to use the correct HSN Code to find the right rate for your goods and services so that you can collect the right taxes. The tax slabs have been fixed at 0%, 5%, 12%, 18% and 28% under GST. The GST rates vary from NIL in case of stapled and unbranded food products whereas the highest tax rates fall for luxury goods like cars, and sin category products like tobacco and cigarettes.
This GST rate finder will help you find the right rate for your products. Just search within the document with the keyword (your product) and you will find the tax rate right away.
How to use the HSN Codes?
There are three different type of HSN Codes under GST for a dealer to use. They are two, four and eight digit HSN Codes for commodities and it depends on the dealer’s turnover in his last financial year.
The GST states that:
Dealers with annual turnover from less than 1.5 crores and greater than 5 crores are classified as per the information the table below,
|Annual Turnover||HSN Coding format|
|Less than Rs 1.5 Crores||No need to use HSN Codes for invoices|
|Between Rs 1.5 Crores and Rs 5 Crores||Two-digit HSN Code for invoices|
|Rs 5 Crores and above||Four-digit HSN Code for invoices|
For dealers who deal with imports and exports, using the correct HSN codes with eight digits is mandatory. As the GST invoices are compatible worldwide with the international invoicing standards.
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