HSN (Harmonised Commodity Description and Coding System) is a multipurpose international product code which is developed by (WCO) World Customs Organization. The introduction of GST created a need for a uniform classification, therefore, India adopted the Harmonised System of Nomenclature for goods.
Adoption of HSN will make GST globally accepted and more systematic. Also simplifying the customs and trade procedures, in turn, minimizing the international trade costs.
HSN applies to whom?
Under GST, the HSN codes are meant for most of the businesses. Every business has to mention two, four, or eight digit HSN code for their products/goods, according to the turnover of the previous year and the nature of business i.e. import or export.
HSN codes to be used according to the turnover are as follows:
- Businesses with a turnover of less than Rs 1.5 crores will not be required to use HSN codes for their goods.
- Businesses with a turnover between Rs 1.5 crores and Rs 5 crores are required to use a two-digit HSN code for their goods.
- Businesses with a turnover equal to Rs 5 crores and above are required to use four-digit HSN codes for their commodities.
- If the business is of imports/exports, using HSN codes of eight digits will be compulsory, as the GST has to be compatible with the international standards and practices.
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