HSN Codes Guide 2024, GST Rates for Goods
The Harmonized System Nomenclature (HSN) codes are integral to India's Goods and Services Tax (GST) framework, facilitating the classification of goods for taxation purposes. These codes help streamline the taxation process by providing a standardised system for identifying products, which is essential for determining applicable GST rates.
What is an HSN Code?
India adopted HSN codes under GST to
categorize goods systematically. Each HSN code is a six-digit number that
provides specific information about a product's category, type, and
description. For domestic purposes, India often uses 4-, 6-, or 8-digit codes
depending on the nature of goods and business turnover.
How does HSN code work in GST?
Businesses registered under GST must declare their HSN codes on invoices to ensure compliance with tax regulations. The number of digits required for HSN codes depends on the turnover of the business:
Declared HSN code till to 31st March, 2021 as following
- Up to ₹1.5 crore: No HSN code required
- ₹1.5 crore to ₹5 crore: Two-digit HSN code
- Above ₹5 crore: Four-digit HSN code
This structure helps tax authorities track transactions accurately and ensures that businesses apply the correct GST rates.
Note:-With effect from 01-04-2021, as per Notification No. 78/2020 – Central Tax, dated October 15, 2020 provides detailed guidelines on this requirement as following
- ₹0 crore to ₹5 crore: Four-digit HSN code
- Above ₹5 crore: Six-digit HSN code
Why are HSN Codes
Important?
Standardized Classification: They ensure goods are classified
consistently across industries and geographies.
Eases Filing Returns: Using HSN codes in GST returns helps in
proper categorization, minimizing errors.
Facilitates International Trade: Since HSN codes are used
globally, they simplify export and import processes.
Determines GST Rates: HSN codes are directly linked to GST
rates, ensuring businesses apply the correct tax rate.
Understanding GST
Rates or slabs
Under the GST system, goods and services are taxed under
different slabs. The primary GST rates are:
0%: Essential goods such as fresh vegetables, fruits, and
certain medical items.
5%: Items of mass consumption, including household necessities
and healthcare products.
12%: Standard goods such as processed food and computers.
18%: Commonly consumed goods like soaps, kitchenware, and
furniture.
28%: Luxury items such as cars, air conditioners, and high-end
appliances.
In addition to these, certain goods may attract compensation
cess (e.g., luxury cars and tobacco).
These rates are determined by the GST Council and can vary
based on product classification under HSN codes.
How to Find the
Right HSN Code?
Finding the correct HSN code can feel daunting, but here are
some tips:
1-Use the GST Portal: The official GST website has a search
tool for HSN codes.
2-Refer to Government Notifications: GST council updates often
contain HSN code lists.
3-Seek Professional Help: Consult a tax expert or accountant
if you’re unsure about the right code.
4-Use Online Tools: Several websites provide HSN code lookup
services based on product descriptions.
Penalties for Using Incorrect HSN Codes
Incorrect HSN code usage can lead to:
a) Rejection of GST returns.
b) Fines or penalties for non-compliance.
c) Increased scrutiny during audits.
It’s crucial to ensure accuracy while filing GST returns to
avoid these issues.
Key Takeaways
a) HSN Codes Simplify Taxation: They make the GST system more
efficient by providing a standardized classification of goods.
b) Accuracy Matters: Always use the correct HSN code and GST
rate to ensure compliance.
c) Stay Updated: GST rates and HSN codes may change. Regularly
check updates from the GST Council.
Conclusion
This is all for "HSN code Guide 2024, GST Rates for goods" and can concluded as under
HSN codes play a Decisive role in India's GST regime by providing a systematic way to classify goods and determine applicable tax rates. Understanding these codes is essential for businesses to maintain compliance and optimize their tax obligations. As the GST framework continues to evolve, staying informed about changes in HSN classifications and corresponding GST rates will be vital for businesses operating in India.
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