With the implementation of the Goods and Services Tax (GST) in India, the taxation system underwent a significant transformation. The HSN code is one of the most important yet often misunderstood components of the GST framework. Whether you’re a manufacturer, trader, or service provider, understanding HSN codes is essential for accurate tax filing, compliance, and seamless business operations.
In this ultimate guide, we’ll break down what HSN codes are, their structure, importance, how they relate to GST, and what every business must know to stay compliant and competitive.
What is an HSN code?
HSN stands for Harmonised System of Nomenclature, an internationally accepted method of naming and classifying products. It was developed by the World Customs Organisation (WCO) to simplify and harmonise international trade.
India has adopted this system for GST to bring uniformity in the classification of goods, which helps with the following:
- Proper tax administration
- Harmonise rates across borders
- Accurate tax reporting and invoicing
Let’s Break Down the Structure of the HSN Code for You
HSN codes are numeric and typically consist of the following:
- 4 digits for basic classification
- 6 digits for a more specific classification (used in international trade)
- 8 digits for even finer classification (used for domestic purposes in India)
Breakdown Example
For toothpaste, the HSN code is 33061010:
- 33 – Cosmetic or toiletry preparations
- 06 – Preparations for oral or dental hygiene
- 1010 – Specific code for toothpaste
HSN Codes vs SAC Codes
- HSN is used for goods
- SAC (Services Accounting Code) is used for services
For example:
- A logistics company offering freight services would use a SAC code
- A manufacturer selling packaging material would use an HSN code
Who Needs to Use HSN Codes Under GST?
The use of HSN codes depends on the annual turnover of the business:
| Annual Turnover | Requirement |
| Up to ₹5 crores | 4-digit HSN code (only for B2B invoices) |
| Above ₹5 crores | 6-digit HSN code mandatory for all invoices |
| For Export/Import | 8-digit HSN code |
Note: Businesses registered under the Composition Scheme are exempt from using HSN codes on invoices.
Why are HSN Codes Important for Businesses?
1. Accurate Tax Classification
Wrong HSN codes can lead to incorrect GST rates, potential penalties, or scrutiny by tax authorities.
2. GST Returns Filing
The right HSN codes ensure:
- Smooth filing of GSTR-1
- Fewer errors and notices
3. E-invoicing & E-way Bill Compliance
HSN codes are mandatory for:
- Generating e-invoices
- Filing e-way bills for transport
4. Global Trade
For import/export businesses, HSN codes ensure customs clarity and reduce delays.
How to Find the Right HSN Code for Your Product?
You can use:
- The official GST portal
- The CBIC HSN code finder
- Trade portals or directories
- Consult a GST practitioner or a CA
When searching, you should:
- Understand your product thoroughly
- Match it with the right chapter and heading
- Choose the most specific code available
Common Mistakes Businesses Make with HSN Codes
Using Generic or Wrong Codes
A product and HSN code mismatch can lead to wrong tax rates and penalties.
Copying from Competitors
Each product may have slight variations. Relying on others’ codes can be misleading.
Ignoring Updates
HSN codes may change with policy revisions. Not staying updated can lead to errors in returns and invoicing.
Recent Updates on HSN Codes Under GST
In August 2021, the government made HSN codes mandatory for:
- B2B invoices for businesses with turnover up to ₹5 crore (4 digits)
All invoices for businesses with a turnover above ₹5 crore (6 digits)
Additionally, the e-invoicing system requires HSN code-wise summary details to be submitted accurately.
Tools & Resources to Help You
Here are a few free resources you can use to find or verify HSN codes:
- GST Portal HSN Lookup Tool
- CBIC’s HSN PDFS
- NIC’s e-Invoice Portal
- Trade or industry-specific guides (textile, electronics, pharma)
You can also use GST software like ClearTax, Zoho, Tally, etc., which integrates HSN code mapping.
Penalties for Wrong HSN Codes
As per the GST law:
- Filing incorrect HSN codes can lead to a notice from the authorities
- Repeat offences may attract a penalty of ₹10,000 or more
- Input Tax Credit (ITC) mismatches due to wrong codes can also lead to ITC denial
Hence, it’s crucial to cross-check and maintain accuracy.
Industry-Specific HSN Code Examples
Here are a few examples for different sectors:
| Industry | Product | HSN Code |
| FMCG | Shampoo | 33051090 |
| Apparel | Cotton Shirt | 62052000 |
| Electronics | Mobile Phone | 85171200 |
| Furniture | Office Chair | 94013000 |
| Pharma | Paracetamol Tablets | 30045010 |
Always check the GST rate attached to each HSN code based on the GST Council updates.
Here is the HSN Code Mapping for Online Sellers
If you’re selling on platforms like Amazon, Flipkart, or Shopify, you are required to:
- Assign accurate HSN codes to each product listing
- Ensure consistency across invoices and GST returns
- Keep your tax profile updated with platforms
Failure to do this can lead to:
- Suspension of listings
- Delayed payments
- Compliance issues
What’s the Future of HSN Codes in India?
India continues to align with WCO’s latest HSN revisions, and with digitisation, we can expect:
- More automation in HSN code mapping
- Real-time validations in GSTN
- AI-powered classification tools
- Tightening of compliance norms
Staying ahead of these trends can give your business a competitive advantage.
Final Thoughts
Understanding HSN codes is not just a tax obligation — it’s a strategic necessity. It ensures your business:
- Stays compliant
- Avoids unnecessary penalties
- Builds trust with buyers, platforms, and partners
Whether you’re a startup or a growing enterprise, investing time in HSN code accuracy will pay off in the long run. So, carefully go through every aspect of the GST HSN code before you plan to embark on an adventure in trading in the global markets.
Once you are done with it, start considering the logistics and shipping requirements you will need along the way. Whether you’re selling abroad or in India, in a small or large volume, NimbusPost has got you covered. Right from powering your logistics journey to warehouse fulfilment success, we ensure that every step of your shipping journey becomes flawless, efficient, and economical.
