GST

HSN Code

A standardised numerical code to classify goods under the GST system

Definition

HSN stands for Harmonized System of Nomenclature, an internationally standardised system of numerical codes used to classify traded goods. In India, HSN codes are mandatory on GST invoices and returns to identify the correct tax rate applicable to each product. The HSN system was developed by the World Customs Organization and is used by over 200 countries. Under GST, businesses with turnover above Rs. 5 crore must use 6-digit HSN codes, those between Rs. 1.5 crore and Rs. 5 crore must use 4-digit codes, and smaller businesses may use 2-digit codes. Each HSN code corresponds to a specific GST rate (0%, 5%, 12%, 18%, or 28%). Correctly mapping HSN codes to your products is essential to charge the right GST rate, avoid penalties during audits, and ensure smooth filing of GSTR-1 and GSTR-3B returns. Incorrect HSN codes can lead to mismatched returns and GST notices from the tax department.

How It Works

  1. 1Every product you sell is assigned an HSN code that determines its GST rate.
  2. 2When you create an invoice, you mention the HSN code alongside each item.
  3. 3The tax department uses these codes to verify you are charging the correct GST rate.
  4. 4During GSTR-1 filing, sales are summarized by HSN code. The code is structured hierarchically — the first 2 digits identify the chapter (e.g., 48 for paper), 4 digits the heading, and 6 or 8 digits the specific product.

Example

A stationery wholesaler in Kolkata sells notebooks, pens, and printer paper. Under GST, notebooks fall under HSN code 4820 (taxed at 12%), ballpoint pens under HSN code 9608 (taxed at 18%), and printer paper under HSN code 4802 (taxed at 12%). When creating an invoice for a customer buying 500 notebooks at Rs. 40 each, the seller must mention HSN code 4820 on the invoice and charge 12% GST, making the total Rs. 20,000 + Rs. 2,400 GST = Rs. 22,400.

How Stock Register Handles This

  • Set HSN code once per product — it auto-fills on every invoice, credit note, and return export
  • Built-in HSN code lookup lets you search by product name and see the applicable GST rate instantly
  • Generates HSN-wise tax summary report needed for GSTR-1 Table 12 filing with zero manual effort

Related Terms

SAC CodeGST (Goods and Services Tax)Sales Invoice / BillGSTR-1Barcode

Related Guides

GST Reports Guide

Frequently Asked Questions

How do I find the correct HSN code for my product?

You can search for HSN codes on the official GST portal (services.gst.gov.in) or use the HSN lookup feature in Stock Register. Search by product name or description and the system will suggest the matching HSN code along with its GST rate. You can also refer to the Customs Tariff Act schedules or consult your CA for complex cases.

Is HSN code mandatory on every invoice?

Yes, HSN codes are mandatory on GST invoices. Businesses with turnover above Rs. 5 crore must use 6-digit HSN codes, those between Rs. 1.5 crore and Rs. 5 crore need 4-digit codes. Even smaller businesses are now required to report at least 4-digit HSN codes on B2B invoices.

What happens if I use the wrong HSN code on my invoice?

Using the wrong HSN code can result in charging the incorrect GST rate, which may lead to a tax notice, demand for differential tax with interest, or rejection of your buyer's ITC claim. During audits, HSN mismatches are a common red flag. It is important to verify HSN codes when adding new products to your inventory.

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