HSN Code Full Form: Meaning, Importance & How It Works Under GST: When dealing with taxation, billing, or trade, you may have often come across the term HSN Code. Many businesses use it daily, yet only a few truly understand what it means and why it is important. In this article, we will explain the HSN Code full form, its purpose, and how it helps simplify trade and GST filing in India.
What is the Full Form of HSN Code ?
HSN Code stands for Harmonized System of Nomenclature.
Created by the World Customs Organization (WCO), the HSN system is used globally to classify goods in a standardized manner. Today, more than 200 countries use this system for customs, taxation, and international trade.
Why Was HSN Code Introduced?
The primary goal of the HSN system is to ensure that all countries use a uniform method of classifying products. This reduces confusion, eliminates discrepancies in trade, and makes taxation more transparent.
Key benefits include:
- Uniform classification of goods worldwide
- Simplified international trade and customs processes
- Easy identification of products for import/export
- Accurate GST calculation in India
Structure of HSN Codes
HSN codes are usually 6 digits internationally.
India uses 8-digit HSN codes for more detailed classification.
Breakdown of HSN Code Structure
- First 2 digits → Product Chapter
- Next 2 digits → Product Heading
- Last 2 digits → Product Sub-heading
- (Optional) Additional 2 digits → Further classification for Indian GST
Example: 64035100
This code classifies different types of footwear.
HSN Codes Under GST in India
Under GST, the use of HSN codes depends on business turnover:
1. Turnover up to ₹1.5 crore
HSN code is not mandatory.
2. Turnover between ₹1.5 crore and ₹5 crore
Use 2-digit HSN code on invoices.
3. Turnover above ₹5 crore
Use 4-digit or 6-digit HSN code on invoices.
4. For exports and imports
Businesses must use 8-digit HSN code.
Why HSN Codes Are Important for Businesses
Using the correct HSN code ensures:
- Proper GST rate is applied
- Hassle-free GST return filing
- Fewer disputes or errors in classification
- Smooth import/export documentation
- Increased business credibility
Incorrect HSN codes can lead to penalties, delayed shipments, or rejection of invoices.
Difference Between HSN Code and SAC Code
| HSN Code | SAC Code |
|---|---|
| Used for goods | Used for services |
| International classification system | Used only for services under GST |
| Numeric (6 to 8 digits) | Numeric (usually 6 digits) |
Examples of Common HSN Codes
| Product | HSN Code |
|---|---|
| Mobile phones | 85171200 |
| T-shirts | 61091000 |
| Shoes | 64035100 |
| Furniture polish | 34052000 |
| Hair oil | 33059011 |
Also Reads: What is HSN Code
Conclusion
The HSN Code (Harmonized System of Nomenclature) is an essential part of GST compliance and global trade. Whether you are a small business owner or a large manufacturer, understanding HSN codes helps ensure accurate taxation, smooth invoicing, and efficient operations.
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