HSN (Harmonized System of Nomenclature) is an internationally accepted 6 digit uniform product coding system developed by World Customs Organisation (WCO).
In India, HSN coding was earlier used under Excise, Customs, and state Value Added Tax (VAT) laws and is accordingly is now used under Goods and Services Tax (GST) law, for classification of products/goods. Further SAC (Service Accounting Codes) as issued by CBIC are used for classification of supply of services.
Currently the requirement of disclosing HSN / SAC on tax invoices / GST returns is governed by Notification No 12/2017- Central tax dated 28-6-2017.
The GST Council in its 42nd Meeting held on Oct, 5 had decided on the Revised Requirement of declaring Harmonized System Nomenclature (HSN) for goods and Service Accounting Code (SAC) for services in invoices and in FORM GSTR-1, which will come into effect from April 1, 2021.
In accordance to the decision of GST Council, Notification No. 78/2020- Central Tax dated 15-10-2020 has been issued by the Central Government wherein changes have been made in the Notification No 12/2017- Central tax dated 28-6-2017 with effect from 1st April, 2021.
For ready reference of our readers the comparative position of use of HSN / SAC is tabulated below:
| Sl. No | Annual Turnover in the preceding year | No. of digits of HSN Code (Existing) | No. of digits of HSN Code (To be effective from 1st April,2021) |
| 1. | Upto Rs 1.50 Crores | Nil | 4* |
| 2. | More than Rs 1.50 Crore and upto Rs 5 crore. | 2 | 4* |
| 3. | More than Rs 5 crores | 4 | 6 |
* As per proviso given in Notification No. 78/2020- Central Tax dated 15-10-2020 a registered person having aggregate turnover up to Rs 5 Cr in the previous FY may not mention the number of digits of HSN Code in a tax invoice issued by him under the said rules in respect of supplies made to unregistered persons. i.e. B2C supplies. Currently no distinction between B2B and B2C supplies exists for purpose of disclosure of HSN/ SAC Codes.
Apart from above it may be noted that the government has the power to notify 8 digit HSN on the notified class of supplies by all taxpayers. Further reference of only HSN is here and thus 8 digit HSN disclosure will be required only for supply of goods and not for services , which is in line with current position where HSN codes of 8 digits are mandatory only in case of export and imports of goods.
For ready reference of our readers the Notification is given below:
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