Now that we have been through the concept of HSN, we now move on to understanding HSN from the Indian context.
India is all set to have its very own Goods & Services Tax or GST, which applies to all goods and services alike. It is a much more detailed classification that added another two digits to the 6-digit structure. Indian manufacturers under GST shall be required to follow a 3-tiered structure of HSN.
It shall subsume many indirect taxes and reduce the burden on the end consumer. India has already been using HSN system since 1986 in the Central Excise and Customs regime.
- Those with a turnover of less than INR 1.5 Crores need not follow HSN
- Those with a turnover exceeding INR 1.5 Crores but less than INR 5 Crores shall be using the 2 digit HSN codes
- Those with a turnover exceeding INR 5 Crores shall be using the 4 digit HSN codes
- Those dealers who are into imports or exports shall mandatorily follow the 8 digit HSN codes
Is HSN Code is mandatory for all the dealers?
HSN codes shall not be used mandatorily in the following cases:
Dealers who have an annual turnover of less than INR 1.5 Crores
Dealers registered under the Composition Scheme of GST are exempted from the usage of HSN Codes
Why is it necessary to follow HSN Codes and SAC Codes?
HSN codes are internationally recognized system of codifying and classifying all the products in the World. It will make GST compliant with the international standards and ensure proper levy of taxes. HSN gives a systematic and logical way of classification, thereby reducing the chances of any misinterpretations. Further, a common structure enables governments of countries to collaborate data of purchases and sales of commodities and analyze the same. Post this analysis, they can decide on macro-economic policies relatable to important commodities.