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HSN code limit for GST

HSN code limit for GST

HSN code limit for GST

The Harmonized System of Nomenclature (HSN) code is an internationally standardized system of names and numbers for classifying goods. It was developed by the World Customs Organization (WCO) and is used by more than 200 countries as a basis for their customs tariffs and for the collection of international trade statistics. The HSN code helps in the systematic classification of goods across various industries, ensuring uniformity in the international trade of goods.

HSN code is used for classifying goods under the Goods and Services Tax (GST) in India. Limit or applicability of HSN codes for businesses under GST depends on their annual turnover.

These requirements ensure a standardized classification of goods, facilitating trade and compliance with GST regulations.

Importance of HSN Codes

  • Uniformity in Classification: Ensures a standardized classification of goods across international borders, reducing confusion and discrepancies in trade.
  • Compliance with International Standards: Facilitates adherence to international trade regulations set by the World Customs Organization (WCO).
  • Efficient Taxation: Helps in determining the correct tax rates for goods under the Goods and Services Tax (GST) regime.
  • Reduces tax evasion by providing a clear and standardized system for categorizing goods.
  • Streamlined Customs Procedures: Simplifies the process of customs clearance by providing a clear classification of goods. Reduce delays and errors in customs documentation.
  • Data Collection and Analysis: Assists governments and organizations in collecting and analyzing trade data. Helps in making informed policy decisions based on accurate trade statistics.
  • Trade Facilitation: Enhances the ease of doing business by providing a clear framework for product classification. simplifies international trade documentation, reducing administrative burdens.
  • Legal and Regulatory Compliance: Ensures that businesses comply with national and international trade laws. Reduces the risk of legal penalties due to misclassification of goods.
  • Transparency and Fairness: Promotes transparency in the taxation and customs processes. ensures fair trade practices by providing a universally accepted system for goods classification.

For B2B Transactions

  • Turnover up to Rs. 1.5 crore INR: Businesses are not necessary to use any HSN code in their GST returns. For B2B transactions, it is optional to use HSN code in their e-invoices and e-way bill.
  • Turnover Rs. 1.5 crore up to Rs. 5 crore INR: Businesses are required to use at least a 2-digit HSN code in their GST returns. For B2B transactions, this requirement ensures that the goods are properly classified, which is important for businesses dealing with each other.
  • Turnover more than Rs. 5 crore INR: Businesses are required to use at least a 4-digit HSN code in their GST returns. Some businesses dealing in goods that are specifically notified by the government may need to use an 8-digit HSN code. For B2B transactions, the detailed HSN code is crucial for accurate classification and taxation.
  • Dealers of imports or exports: Merchants who is engaged in Import Export shall use 8-digit HSN code in their GST returns.

For B2C Transactions

For B2C transactions, the HSN code requirements are the same as mentioned above, based on the turnover of the business. However, for retail sales to consumers, the HSN code might not be as prominently displayed as it is in B2B transactions. Nonetheless, businesses must still comply with the HSN code requirements in their GST returns and invoices as per their turnover threshold.

  • Turnover up to 5 crore INR: Optional 4-digit HSN code.
  • More than 5 crore INR: Mandatory 6-digit HSN code.

It is important for businesses to adhere to these requirements to avoid penalties and ensure compliance with GST regulations.

How to use HSN Code?

  1. Identify the Product: Determine the product you are dealing with.


In India, HSN codes are crucial for the Goods and Services Tax (GST) regime. The number of digits in the HSN code required to be mentioned on invoices depends on the business turnover. Understanding and correctly applying the HSN code is essential for businesses under the GST regime. It ensures compliance with tax regulations, simplifies international trade, and facilitates accurate classification and taxation of goods. For correct HSN must consult with expert to avoid the penalties and legal consequences. Company Suggestion provides services like GST Registration, GST Returns and other compliances of GST Law.

If you have any doubt regarding this, then you can send your doubts on company suggestion and our team of experts will guide you.

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