Understanding HSN Codes: How They're Framed, How They Work, and How to Find Them

25/07/2025

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1. What Is an HSN Code?

The Harmonized System of Nomenclature (HSN) is a globally standardized classification system, introduced by the World Customs Organization (WCO) in 1988. It assigns multi-digit numeric codes to goods, helping countries like India streamline trade, customs duty, and taxation processes

2. Structure of HSN Codes

HSN codes are hierarchical, with increasing specificity as digits are added:

1.     2 digits: Chapter (broad category)

2.     Next 2 digits: Heading (subcategory)

3.     Next 2 digits: Subheading (detailed item)

4.     Extra 2 digits (India only): For domestic variations, forming a full 8?digit code

Example:

• 6109 10 00:
• 61 = Apparel (knitted)
• 09 = T-shirts, singlets
• 10 = Made of cotton
• 00 = Standard plain T-shirts

3. How HSN Codes Work

? International Standard

• The first 6 digits follow global WCO rules for classification, supporting customs duties and trade statistics across countries.
• Countries like India append 2 more digits to refine national classifications for GST and domestic tariff control.

? For GST & Compliance in India

• HSN codes link directly to GST rates (e.g., 0%, 5%, 12%, 18%, or 28%) and are essential to accurate tax filings ?5 crore: At least 4 digits; often full 6 or 8 digits
• Exporters/importers: Full 8-digit HSN compulsory
• India uses HSN codes based on business turnover:
• ? ?1.5 crore: Optional
• ?1.5–5 crore: Minimum 2-digit prefix

4. Benefits of Using HSN Codes

• Uniformity & global compatibility – a shared “product language” worldwide.
• Accurate tax alignment – fewer errors, fewer audits, correct GST application.
• Efficient customs and trade processing – streamlined clearance, clear trade data.
• Data insights – governments use HSN data to monitor trade trends, set tariffs, and enforce compliance.

5. How to Obtain the Right HSN Code

1.     Define your product clearly (material, category, function).

2.     Search official government sites:

o    GST Portal: Search HSN/SAC Tax Rates tool – lookup by partial name or prefix (min 3 characters/digits). Download full HSN directory in XLS.

o    CBIC Tariff: For lookup during import/export duty classification.

3.     Verify GST rate with official sources (GSTN, tariff notifications).

4.     Pick the right digit length based on turnover and purpose:

• Small trader (<?1.5?Cr): optional
• Medium (?1.5?5?Cr): first 2 digits
• Large (>?5?Cr): full 6–8 digits
• Trade/exports: full 8-digit mandatory.

5.     Example Walkthrough

Product: Cotton T?shirt

1.     Start with generic 6109 ? Heading for T?shirts

2.     Add 10 for cotton subheading ? 6109 10

3.     Use 00 or more digits if needed (e.g., plain vs. printed).

6.     Common Mistakes to Avoid

• Using non?official/partial codes from random sites
• Failing to update codes when GST slabs change
• Incorrect digit-level use leading to invoice rejection

? Conclusion

HSN codes are a vital part of India’s GST ecosystem—ensuring accurate tax, effortless trade, and efficient compliance. Whether you’re invoicing domestically or trading internationally, a clear understanding of their structure and usage is essential.