HSN code updates detailed in referenced Notification and Circular
As per Notification no Notification No. 78/2020 – Central Tax, 15th October,
2020
The notification specifies
changes to the requirement for mentioning the number of digits of the
Harmonized System of Nomenclature (HSN) Code on tax invoices, effective April
1, 2021:
Aggregate Turnover
Criteria:
Turnover up to ₹5 crores:
4-digit HSN Code required.
Turnover above ₹5 crores:
6-digit HSN Code required.
Exception:
Registered persons with
turnover up to ₹5 crores may omit the HSN Code digits on invoices for supplies
made to unregistered persons.
Updates/Advisory to E-Way Bill
Requirements
From 1st February 2024,
taxpayers must include HSN codes in e-way bills as per Notification No. 78/2020
– Central Tax. Taxpayers with an Annual Aggregate Turnover (AATO) exceeding ₹5
crores must provide at least 6-digit HSN codes for all B2B and export
transactions, while those with AATO below ₹5 crores must provide at least
4-digit HSN codes. Taxpayers are advised to update their systems accordingly to
comply with this requirement.
Mandatory 6-Digit HSN Code for E-Invoices
businesses with an Annual Aggregate Turnover (AATO) of ₹5 crores and above will be required to include a minimum of 6 digits of the HSN code in their e-invoices. This mandate aims to enhance transparency and accuracy in product classification within the GST framework. Taxpayers below this threshold must use at least a 4-digit HSN code in their e-invoices and e-way bills.
Updates to E-Way Bill Requirements
Advisory issued for the GST E-way Bill system was updated to require that businesses with an AATO over ₹5 crores include a minimum of 6-digit HSN codes in their e-way bills as well. For those with an AATO below ₹5 crores, a minimum of 4-digit HSN codes is still necessary.
Previous Regulations
Previously, since April 1, 2021, the requirement for HSN codes was structured based on turnover:
- Businesses with an AATO up to ₹1.5 crores were not required to use HSN codes.
- Those with an AATO between ₹1.5 crores and ₹5 crores needed to use a 2-digit HSN code.
- Businesses exceeding ₹5 crores were mandated to use a 4-digit HSN code on B2B invoices.
Importance of Compliance
These updates emphasize the government's focus on improving tax compliance and reducing errors in reporting. Businesses are advised to update their invoicing systems promptly to align with these new requirements and avoid potential penalties or disruptions in operations.
Conclusion
for more information about HSN, read "HSN Codes Guide 2024, GST Rates for Goods"