HSN stands for the Harmonized nomenclature system. The World Customs Organization (WCO) has developed HSN to systematically classify goods around the world for tax purposes in identifying each product. HSN classification encompasses more than 5,000 items and came into force in 1988.
The HSN is universal and has been adopted for standardized classification, the basis for customs tariffs, and for the compilation of foreign trade statistics by more than 200 countries. Moreover, then there have already been 5 revisions implemented worldwide.
HSN code meticulously claims over 5000 products and is commonly used by more than 150 countries. It is a multipurpose tool accepted globally for customs and trade procedures. More than 95 percent of trading is currently under the WCO and each country implements revised HSN codes like India in 2017.
The main objective of the WCO for introducing HSN codes is to systematically classify all the goods. It clears the confusion and aids the countries in domestic and international trade. Around the world, more than 20,000 goods are traded between countries using HSN codes.
WCO uses the revised HSN codes to make more than 90% of world trade. This kind of characterization is used for purposes of tax collection in recognizing the duty rate appropriate to an item in a country. Additionally, this code is used to determine the number of items that were traded or imported through a region.
Amendments in the HSN system
There are 233 changes made in HSN codes which will be adopted by each nation as of 1/01/2017 for the customs declaration for the exported or imported products. Those modifications include:
- The agricultural sector (85)
- Chemical sector (45)
- Wood sector (13)
- Textile sector (15)
- Base metal sector (6)
- Machinery sector (25)
- The transport sector (18)
- Other miscellaneous sectors (26)
HSN Code Search
An HSN Code is assigned to each product. An HSN code consists of six digits arranged in a logical frame. During the Central Excise and Customs system, HSN classification was already in existence in India but it became specified in the GST with two more digits added. Hence, there is an 8-digit HSN code in the GST regime.
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Why HSN Code is Important?
The Indian Taxation System has segregated more than 1211 goods for sections of under 6 general classes or evaluation. These are 0%, 5%, 12 %, 18t%, and 28%, respectively. Using GST rates all around will end up orderly, reducing the worldwide exchange expenses.
The recognition of goods becomes less complicated, resulting in fewer error results during billing and reconciliation. While recording GST returns on the web, the supply of products requires HSN code so that the proper tax amount is charged against the goods.
Summary of HSN Code
- Section 1: Animals, Livestock
- Section 2: Vegetables and their production
- Section 3: Fats and oils of vegetables or animals and their cleavage products, prepared edible fats, waxes of animals or plants
- Section 4: Substitutes for fruit, drinks, spirits and vinegar, tobacco and tobacco produced
- Section 5: The Minerals
- Section 6: Chemical or Allied Industries Product
- Section 7: Plastics and their articles, Rubber and their articles
- Section 8: Raw hides and skins, leather, furskins, saddlery and harnesses, and similar containers, travel goods, handbags animal intestines.
- Section 9: Wood and wood articles, wood charcoal, cork and cork articles, straw, esparto or other plaiting manufacturers
- Section 10: Wood pulp or other cellulose fibrous material, paper or paperboard (waste and scrap), paper and paperboard and articles thereof
- Section 11: Articles concerning textiles and textiles
- Section 12: Footwear, headgear, seat sticks, whips, artificial flowers, prepared feathers and articles made with them,
- Section 13: Stone, plaster, cement, asbestos, mica or similar, products for ceramics, glass, and glassware
- Section 14: Natural or cultivated pearls, Precious or semi-precious stones, precious metals, metal-coated, Imitation Jewelry, Coins in precious metal and their products,
- Chapter 15: Basic Metals and Base Metal Papers
- Section 16: Machinery and electrical devices, pieces thereof, sound recorders, electronic and reproducing machines, TV pictures, and other recorders and players.
- Section 17: Cars, planes, ships and associated transportation equipment
- Section 18: Cinematographic, optical, photographic, calculating, testing, accuracy, Medical or surgical instruments and appliances, watches and clocks, musical instruments, parts and accessories
- Section 19: Weapons and guns, pieces and accessories
- Section 20: Miscellaneous Created Papers
- Section 21: Artworks, Pieces, and Antiques of the Collectors
Benefits of HSN Code
- It helps in the characterization of goods for customs and central excise throughout the country
- It provides a uniform fiscal assessment framework worldwide
- More ease of universal cooperation
- It can also be used to record returns, solicitations, and others
The first six digits of HSN code can not be changed as per WCO guidelines, however, the customs authority can change the last four digits that include regional tariff and national tariff. This HSN code helped the government seamlessly implement GST on goods and services, as India had already adopted the HSN system under the Central Excise and Customs regime.
India implements a system of 8-digit HSN code. It is much of a detailed classification system in mode than the standard 6-digit structure that WCO defines. There are 21 sections in total which comprise 99 chapters divided into 1244 headings and 5224 subheadings.
The World Customs Organization is creating HSN (Harmonized System of Nomenclature). These codes are used for the classification of the goods and are accepted worldwide. HSN codes help to fill the returns, imports, and exports of goods on GST. HSN codes are used by the taxpayers to identify products when filing GST returns. If the turnover of the dealers or taxpayers exceeds 1.5 Crores, then he/she must mention the HSN code in the invoice otherwise it is not compulsory to disclose HSN on the taxable invoice.