With the HSN Code and GST Rate, India’s tax system underwent a significant transformation in 2017. The GST system has replaced multiple taxes and brought uniformity in taxation across the country. To make the GST system more effective, the government has created a unique tax classification system called the Harmonised System of Nomenclature (HSN).
What is the HSN code?
HSN code is a unique classification system that assigns a code number to all the goods and services that are traded in India. The HSN code is an internationally recognised system that has been adopted by over 200 countries. The HSN code contains six digits, and it is used for the identification of goods and services.
Each of the six digits in the HSN code has a specific meaning
- The first two digits represent the chapter under which the goods or services fall.
- The next two digits indicate the heading of the goods or services.
- The fifth digit shows the sub-heading.
- The sixth digit shows the classification of the product within the sub-heading.
The HSN code is used to determine the GST rate that applies to the product or service. The HSN code is mandatory for all taxpayers who are registered under the GST system.During GST registration, businesses are required to provide correct HSN codes to ensure tax compliance.
What is the GST rate?
The GST rate is the tax rate that is applied to goods and services. The GST rate is expressed as a percentage of the value of the goods or services.
The GST rate is determined by the GST Council, which is a body that comprises representatives from all the states and the central government. The GST Council has the power to change the tax rates for different products and services based on the economic situation in the country.
Under the GST system, some products and services are exempt from tax, while others have a nil GST rate. For example, milk and educational services have a nil GST rate, while goods like cigarettes attract a high GST rate.If you are unsure how much tax to charge or pay, using a GST calculator can help estimate your liability accurately.
How to find HSN code and GST rate?
The easiest way to find the HSN code and GST rate for a particular product or service is by using the online GST portal. The GST portal has a search function that allows you to search for the HSN code of any product or service. Once you enter the HSN code, the portal will automatically display the corresponding GST rate.
Alternatively, you can also refer to the GST rate schedule, which is available on the GST website. The GST rate schedule lists all the goods and services and the corresponding GST rate for each product or service.It is also important to refer to the correct GST State Code while filing returns, especially for inter-state transactions.
In conclusion, the HSN code and GST rate are essential components of India’s TAX system. The HSN code is a unique classification system that assigns a code number to all the goods and services traded in India. The GST rate is the tax rate that is applied to goods and services. The HSN code and GST rate are used to determine the tax liability of taxpayers who are registered under the GST system.Whether you are under the regular scheme or the GST Composition Scheme, understanding these classifications is key to staying compliant.As a business owner, it is crucial to understand the HSN code and GST rate for all the products, and services you sell to ensure compliance with the tax laws. Filing an accurate GST return helps you avoid fines and keeps your business running smoothly. Also, knowing the correct classification of your products helps you claim a GST refund on time, whenever you are eligible.
