Video Transcription

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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