What is HSN code- Harmonized System of Nomenclature
HSN CODE AND THEIR ADVANTAGES IN GST:
HSN codes are Harmonized system of nomenclature. When we aim at the classification of goods and services with benefits involved these codes are used. These are 2 digit, 4 digit, 6 digit, 8 digit. Usually every these codes are same but in few countries they vary basing upon the nature and system of goods. So, when we are talking about the goods and service tax these codes are used to classify the taxable goods and services under GST. We are using HSN codes even now under value added tax and for the classification of goods. After the roll out of GST we will be using the HSN codes will be used under GST for the classification of goods and services.
There are 99 chapters of HSN. And there are groups classified under them. But What are the classifications under the digits of codes? About 21 groups of HSN codes are classified. These 21 sections of HSN codes are sub classified in to 99 Chapters of HSN code. So, every chapter is classified as the 2 digit code. Under which there is 4 digit HSN code sub classification. And sub classification is done as 6 digit codes.
As per HSN normally 6 digit HSN code is accepted world wide. Normally many countries involve additional 2 digit in HSN code. So, there 8 digit HSN codes are used. These HSN codes are usually used for the taxation purpose. Especially when the goods are being imported. As there are the same HSN codes for different groups of goods, There can be easy in implied taxation process. So the calculations done worldwide for the import export of goods are easy.
List of ITC HS Codes:
When a tax payer in INDIA under GST completes first year under GST, the turnover for previous year will be considered as baseline for using HSN codes of 4 digits. The use of HSN codes below its standards is to make GST systematic and globally accepted. If turnover of the tax payer is between Rs 1.5 Crores and Rs 5 Crores in the earlier financial year, there will not be any compulsion of HSN codes, but there can be an application of the two digit code as a good practice for the coming year because, from second year of GST operations, mentioning 2-digit chapter level HSN Code will be mandatory for all taxpayers with turnover in previous financial year between Rs. 1.5 Crores and Rs. 5 Crores. HSN code at 2 digit will be very much easier for taxpayers and to make GST an international compatible tax as well. Indian authorities have further categorized six digit HSN into another two digit sub chapter,thus making total number of digit to be eight. This eight digits code will be mandatory in case of export and imports under the GST regime.
The GST law has to be compatible with international standards. The concept of HSN codes are accepted worldwide and to become internationally competitive INDIA has to come up with these code and make imports and exports more favorable for India.