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HSN Code

What is HSN Code?#

HSN code stands for “Harmonized System of Nomenclature”. This system has been introduced for the systematic classification of goods all over the world. HSN code is a 6-digit uniform code that classifies 5000+ products and is accepted worldwide. It was developed by the World Customs Organization (WCO) and it came into effect from 1988. HSN Code SAC Code GST Rate Finder

How does HSN code work?#

It has about 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure. It is supported by well-defined rules to achieve uniform classification. Why is HSN important?

The main purpose of HSN is to classify goods from all over the World in a systematic and logical manner. This brings in a uniform classification of goods and facilitates international trade. HSN Worldwide

The HSN system is used by more than 200 countries and economies for reasons such as:

  • Uniform classification
  • Base for their Customs tariffs
  • Collection of international trade statistics

Over 98% of the merchandise in international trade is classified in terms of the HSN.

Harmonized System of Nomenclature number for each commodity is accepted by most of the countries. The HSN number remains same for almost all goods. However, HSN number used in some of the countries varies little, based on the nature of goods classified. HSN in India

India is a member of World Customs Organization(WCO) since 1971. It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8 digit classification.

Understanding the HSN Code#

The HSN structure contains 21 sections, with 99 Chapters, about 1,244 headings, and 5,224 subheadings.

  • Each Section is divided into Chapters. Each Chapter is divided into Headings. Each Heading is divided into Sub Headings.
  • Section and Chapter titles describe broad categories of goods, while headings and subheadings describe products in detail.

For example:

Handkerchiefs made of Textile matters 62.13.90

  • First two digits (62) represent the chapter number for Articles of apparel and clothing accessories, not knitted or crocheted.
  • Next two digits (13) represent the heading number for handkerchiefs.
  • Finally, last two digits (90) is the product code for handkerchiefs made of other textile materials.

India has 2 more digits for a deeper classification.

If the handkerchiefs are made from a man-made fibre, then the HSN code is 62.13.90.10.

If the handkerchiefs are made from silk or waste from silk., then the HSN code is 62.13.90.90. Services Accounting Code (SAC) in GST

These HSN codes must be declared in every tax invoice issued by the taxpayer under GST. The turnover for previous year will be considered as a basis to find out number of HSN digits to be used.