In the modern Indian taxation system, the HSN Code (Harmonized System of Nomenclature) plays a pivotal role in ensuring uniform classification of goods across various sectors. Introduced to streamline indirect taxation, especially under the Goods and Services Tax (GST) regime, the HSN system enables accurate tax rate application and promotes consistency in trade documentation.

At VyapaarKHATA, we recognize how crucial it is for businesses to generate GST-compliant invoices that incorporate the correct HSN codes. Our platform offers customizable invoicing solutions tailored to the needs of micro, small, medium, and large enterprises, helping them stay tax-compliant and operationally efficient.

The introduction of GST in India brought about the need for a standardized classification system for goods to avoid confusion and streamline the tax process. That’s where HSN Codes come into play.

Globally standardized and widely used, HSN Codes are critical for identifying and categorizing products during trade, taxation, and logistics processes. They facilitate accurate reporting, invoicing, and payment of applicable GST.

What is an HSN Code?

HSN Code, short for Harmonized System of Nomenclature, is an internationally recognized system developed by the World Customs Organization (WCO) in 1988. The objective of the system is to classify goods in a uniform manner worldwide, thereby facilitating international trade and customs clearance.

In India, HSN codes have been adopted under the GST regime to help businesses:

• Categorize their goods in line with global and national standards.
• Determine the appropriate GST rate applicable.
• Avoid misclassification and tax penalties.
• Enable seamless movement of goods across borders.

Currently, over 200 countries use the HSN system, covering more than 98% of goods traded globally.

Structure of HSN Code

International Format of HSN Code

The HSN Code (Harmonized System of Nomenclature) is an internationally accepted system for classifying goods. It is developed and maintained by the World Customs Organization (WCO) under the Harmonized Commodity Description and Coding System.

Applicable Standard:

• WCO Harmonized System Convention
• HS Nomenclature – 2022 Edition (latest)
• ISO/IEC 6523: For international coding of products

Structure: 6-digit format

• First 2 digits: Chapter
• Next 2 digits: Heading
• Next 2 digits: Sub-heading

Example (International Format): HSN Code -  8517.12 - For Telephones for cellular networks

• 85 – Chapter (Electrical machinery)
• 17 – Heading (Telephone apparatus)
• 12 – Sub-heading (Cell phones)

Indian Format of HSN Code

India has adopted the HSN structure with an 8-digit extended format for taxation and trade classification under GST, overseen by the Central Board of Indirect Taxes and Customs (CBIC).

Applicable Standard:

• Customs Tariff Act, 1975 (as amended)
• HSN-based Indian Customs Tariff (2022 Edition) published by CBIC
• GST Act, 2017 – Section 22 & 23: Applicability of HSN for turnover-based taxpayers

Structure: 8-digit format: 

• First 6 digits: Matches WCO standard
• Last 2 digits: Indian sub-classification (regional variations, tax slabs, etc.)

Example (Indian Format): HSN Code - 8517.12.00 For Telephones for cellular networks

• 85 – Chapter (Electrical machinery)
• 17 – Heading (Telephone apparatus)
• 12 – Sub-heading (Cell phones)
• 00 – Indian extension for more specificity

8517.12.00 are further categorized as 8517.12.01 (HSN for Transmission devices of an operating frequency between 824 and 849 MHz) in terms of Indian HSN standards.

Comparison Table: International vs Indian HSN Format

Criteria	International HSN	Indian HSN
Governing Body	World Customs Organization (WCO)	Central Board of Indirect Taxes and Customs (CBIC)
Number of Digits	6 digits	8 digits
Basis of Standard	HS Convention	Customs Tariff + GST Act
Purpose	Global customs & trade	GST compliance & taxation
Regional Classification	Not applicable	Yes, 7th & 8th digits for India
Latest Standard Version	HS Nomenclature 2022 Edition	Indian Customs Tariff 2022

VyapaarKHATA integrates this structure into its invoicing system, allowing businesses to auto-fill HSN codes based on their product description, saving time and reducing the scope for error.

Why is HSN Code Important?

The HSN Code is more than just a classification tool—it is a legal requirement under GST. Its importance can be summarized as follows:

• Legal Compliance: GST returns and invoices must include accurate HSN codes to be accepted by tax authorities.

GST Rate Determination Based on HSN Code

In India, each HSN (Harmonized System of Nomenclature) code is tied to a specific GST (Goods and Services Tax) rate, which determines how much tax a product attracts during its sale or purchase.

The GST Council, along with the CBIC (Central Board of Indirect Taxes and Customs), classifies goods under one of the following standard GST slabs:

• 5% – Essential goods
• 12% – Semi-essential or intermediate goods
• 18% – Standard goods and services (majority fall here)
• 28% – Luxury items and demerit goods

Each product's HSN code falls into one of these slabs as per the GST rate schedule issued by the Government of India.

Explanation of Each Slab with HSN Code Example:

• 5% GST Slab – Essentials

These are products of basic necessity such as food items, agricultural goods, and life-saving medicines.

• • HSN Code: 1006.30.20 (Basmati rice)
  • Description: Semi-milled or wholly milled rice
  • GST Rate: 5%

• 12% GST Slab – Semi-Essentials

Includes processed food, some household items, personal care products, etc.

• • HSN Code: 3306.10.10 (Toothpaste)
  • Description: Dental hygiene preparations
  • GST Rate: 12%

• 18% GST Slab – Standard

Covers most manufactured goods, consumer products, and industrial tools.

• • HSN Code: 8504.40.10 (UPS systems)
  • Description: Static converters (UPS/Inverters)
  • GST Rate: 18%

• 28% GST Slab – Luxury & Sin Goods

Applies to non-essential, high-end items or goods that may negatively affect health/environment.

• • HSN Code: 8703.23.91 (SUVs)
  • Description: Motor vehicles with engine capacity > 1500cc
  • GST Rate: 28% + Cess

Standardization: Reduces classification disputes and ensures uniformity across the supply chain.

International Trade: Necessary for customs clearance and global exports.

Audit & Inspection Readiness: Accurate coding helps in efficient scrutiny during audits.

At VyapaarKHATA, we offer automated HSN code validation, ensuring your invoices are compliant and aligned with current GST norms.

Who Should Use HSN Code?

Under the GST framework, the requirement to mention HSN codes in invoices depends on the annual turnover of the business:

Businesses operating across multiple product categories, or involved in exports/imports, are required to use 8-digit codes for detailed product classification.

With VyapaarKHATA, businesses can customize the level of HSN detail in their invoices based on these criteria.

Difference Between HSN and SAC Codes

While HSN Codes are for goods, SAC (Services Accounting Code) is used for services under GST. Here's a quick comparison:

VyapaarKHATA supports both formats, ensuring accurate invoicing whether you’re selling goods, services, or both.

How to Find the Right HSN Code for Your Product

Finding the correct HSN code can be time-consuming. Here are several ways to identify the right one:

• Search Product HSN at HSN Finder by VyapaarKHATA.
• HSN Code Directories: Government-published PDFs and classification handbooks.
• Tax Consultants or Chartered Accountants: Professional advisory.
• VyapaarKHATA Invoicing Tool: Built-in search library that maps products to accurate HSN codes instantly.

With VyapaarKHATA, users can eliminate guesswork by selecting HSN codes from a predefined product list during invoice creation.

Examples of Common HSN Codes in India

Below are some frequently used HSN codes and the associated goods:

VyapaarKHATA enables one-click application of these codes based on saved product templates

HSN Code and GST Rate Mapping

Each HSN code is mapped to a specific GST rate. Below is a basic representation

Our VyapaarKHATA software cross-verifies the entered HSN code and applies the correct GST rate based on the latest government updates.

Penalties for Wrong HSN Code Usage

Incorrect or missing HSN codes can result in:

• Monetary Penalties: Up to Rs 50,000 (Rs 25,000 under CGST + Rs 25,000 under SGST).
• GST Return Mismatches: Leading to notice and scrutiny.
• Invoice Rejections: Causing payment delays.
• Compliance Risk: Impacting your GST rating and audit readiness.

VyapaarKHATA minimizes these risks by validating entries in real-time, helping you stay compliant and audit-ready.

HSN Codes are a fundamental part of the GST framework and play a vital role in proper product classification, tax compliance, and efficient invoicing. As businesses expand, the need for automation in GST documentation becomes critical.

That’s where VyapaarKHATA steps in.

• We offer a smart, customizable invoicing platform that integrates:
• Auto-assign HSN/SAC codes
• Built-in GST rate application
• Error-proof billing
• E-invoice and GSTR support