Harmonized System of Nomenclature Code

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GST taxpayers will have to furnish HSN (Harmonised System of Nomenclature Code) in their invoices with effect from the 1st April, 2021.

• It is applicable to those businesses whose turnover is more than Rs 5 crore.

About

• In trade parlance, every product is categorised under an HSN code (Harmonised System of Nomenclature).
• The common HSN codes apply to Customs and GST, importers and exporters have been furnishing these codes in import/export documents.

Harmonized System of Nomenclature Code (HSN)

• It is a six-digit identification code. Of the six digits, the first two denote the HS Chapter, the next two give the HS heading, and the last two give the HS subheading.
• It helps in systematic classification of goods across the globe.
• It was developed by the World Customs Organization (WCO) and it came into effect from 1988.
  • India has been a member of the WCO (World Customs Organization) since 1971.
• Also called the “universal economic language” for goods.

                                                                           Image Courtesy: Tradeglobal

Importance of the HSN Code

• It helps in systematic classification of goods, it can also be used to gather data and solve problems that would otherwise be difficult to obtain.
• Over 200 countries use the system as a basis for their customs tariffs, gathering international trade statistics, making trade policies, and for monitoring goods.
• HSN numbers exist for each commodity in every country, and the number remains the same for almost all goods.
  • The system helps in harmonising customs and trade procedures, thus reducing costs in international trade.

Source: LM