What is HSN Code?

HSN (Harmonized System of Nomenclature) is a globally recognised coding system, developed by the World Customs Organization, used to classify goods systematically for taxation. Under GST, businesses mention the HSN code applicable to the goods they supply on invoices and in GST returns, so that the correct tax rate and reporting apply.

• GST-registered businesses are required to declare HSN codes on tax invoices, with the required number of digits depending on their aggregate annual turnover, as notified by CBIC from time to time.
• Larger turnover businesses generally need to report more digits (up to 8) than smaller businesses — check the current turnover-wise digit requirement on cbic-gst.gov.in / gst.gov.in before applying a specific number.

• HSN codes are also reported in GSTR-1 at the HSN summary level, helping tax authorities reconcile the goods/services supplied with the applicable GST rate.
• The GST Rate Finder and e-invoice/e-way bill systems also use HSN (for goods) and SAC (for services) codes to validate tax rates and document details.

• Using an incorrect or outdated HSN code, leading to wrong GST rate application.
• Mentioning fewer digits than required for the business's turnover slab.
• Mixing up HSN (goods) with SAC (services) codes on invoices for service businesses.