Today we will talk about HSN Codes and Service Accounting codes
The Harmonized Commodity Description and Coding System generally referred to as “Harmonized System of Nomenclature” or simply “HSN” is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It comprises about 5,000 commodity groups; each identified by a six digit code, arranged in a legal and logical structure. It is supported by well-defined rules to achieve uniform classification. In Indian Context, a taxpayer having a turnover exceeding Rs 5 crore is required to follow th e HSN code of 4 digits.
SAC stands for Service Accounting Codes which are adopted by the Central Board of Excise and Customs (CBEC) for identification of the services.
Similar to the International HSN Codes, India has adopted a Service Accounting Code (SAC) for all its services. Since GST is a combination of goods and services both, an equable classification for services is also required. SAC will remain the same under the GST regime.
After completing the first year under GST, the turnover for the previous year will be considered as a baseline for using HSN codes of 4 digits.
In the GST return forms, the rate of tax shall be auto-populated based on the HSN codes used in furnishing invoice level purchase or sale information.
The use of HSN codes is being done to make GST systematic and globally acceptable.
For taxpayers with turnover between Rs 1.5 crores and Rs 5 crores in the preceding financial year, HSN codes may be specified only at 2-digit chapter level as an optional exercise to start with.
Using HSN code at 2 digits chapter level will be an easier exercise for taxpayers and make Indian GST an internationally compatible tax as well.
This eight digits code will be mandatory in case of export and imports under the GST regime.
The inclusion of HSN will make Indian GST law compatible with international standards.
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