GST: Requirement of HSN Code is mandatory w.e.f. 01.04.2021

 



CBIC makes it mandatory to declare HSN Code w.e.f. 01.04.2021

CBIC- Central Board of Indirect Tax and Customs amended its earlier notification regarding the requirement of HSN Code wherein all the businesses who had turnover of  more than one crore fifty lakhs rupees in a year were required to declare the HSN Code. According to the new notification issued by the CBIC dated 15.10.2020, irrespective of the turnover, it is mandatory for all the business owners to declare the HSN code under GST. In this article we will discuss the amendments made with regards to the requirement of the HSN Code for Tax Invoice under GST (Goods and Service).


What is HSN Code?

HSN is “Harmonized System of Nomenclature”, a 6 digit uniform code that was developed by the World Customs Organization (WCO) which was introduced to classify 5000+ products. The HSN Code came into effect from the year 1988 and is accepted worldwide. The HSN has been introduced so that systematic classification of goods around the world can be possible.

Amendment in the Provisions of HSN under GST

  • Via Notification No. 78/2020- Central Tax dated 15.10.2020, the CBIC announced that w.e.f 01.04.2021, It would be mandatory to declare the HSN Code on the TAX Invoices of Goods and Services.
  • This declaration of HSN Code shall be made irrespective of the Turnover.
  • However, the digits of the HSN Code would depend upon the turnover of the preceding Financial Year as follows:

 

No.

Aggregate Turnover in the preceding Financial Year

Number of Digits of Harmonized System of Nomenclature Code (HSN Code)

1.

Up to rupees five crores

4 Digits

2.

more than rupees five crores

6 Digits

 

  • The 4 digit HSN Code for Goods and Services is mandatory to be mentioned in B2B Tax Invoices for the taxpayers whose aggregate turnover is up to INR 5 crores in the previous Financial Year.
  • However, in case of B2C Tax invoices i.e. when supplies are made to unregistered persons, the 4 digit HSN code for Goods and Services can be mentioned on an optional bases wherein the aggregated turnover is up to 5 crores in the previous Financial Year.
  • Also, for the taxpayers who have aggregate turnover of more than Rs. 5 Crores in the previous Financial Year, the 6 digits HSN Code on the supplies of Goods and Services is mandatory B2B as well as B2C tax invoices.

Download: PDF of the Notification No. 78/2020- Central Tax dated 15.10.2020

Penalty for not mentioning HSN Code

In case of non-mentioning or mentioning wrong HSN code under the Goods and Service Tax Act, the penalty of INR 50,000/- ( INR 25000/- for CGST and SGST each) shall be levied.

 

It is Important to mention the HSN Code for the purpose of classifying goods from all over the World in a logical and systematic manner. This does not only set a system but also bring a uniform classification of the Goods and Services and facilitates International Trade.

 

Suggested Read: E-Way Bill under Under GST


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