Mandatory to mention 4/6-digit HSN/SAC Code w.e.f. April 1, 2021

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The Central Board of Indirect Taxes (“CBIC”) issued Notification No. 12/2017- Central Tax dated June 28, 2017, to show specified digits of Harmonised System of Nomenclature (“HSN”)/ Service Accounting Code (“SAC”) Code on raising of tax invoices for supply of goods or services as under:

S. No.

Aggregate Turnover in the preceding Financial Year

Number of Digits of HSN Code
1. Upto INR 1.50 crore

Nil

2.

More than INR 1.50 crore and upto INR 5 crores

2
3. More than INR 5 crores

4

Subsequently, the above notification was amended vide Notification No. 78/2020 – Central Tax, dated October 15, 2020 to mandate 4/6- digit HSN/SAC Code on supply of goods or services on the tax invoices w.e.f. April 1, 2021:

S. No.

Aggregate Turnover in the preceding Financial Year

Number of Digits of HSN Code

1.

Upto INR 5 crores 4
2. More than INR 5 crores

6

Further, a proviso was inserted to provide that 4- digits of HSN Code is optional in respect of supplies made to unregistered persons i.e., B2C supplies for a registered person having aggregate turnover upto INR 5 crores in the previous financial year.

Thereafter, Notification No. 12/2017- Central Tax dated June 28, 2017 was again amended vide Notification No. 90/2020 – Central Tax, dated December 01, 2020 to provide for class of supply- ‘Chemicals’ whose HSN Code are required to be mentioned at 8-digit on the tax invoices.

Further, it is to be noted that the above changes of mentioning 4/6 Digit HSN/ SAC code, as applicable, are also required to be captured in Table 12 of Form GSTR-1 (i.e., details of outward supplies of goods or services) and therefore, corresponding changes are made in the same.

Furthermore, it is very important to mention the correct HSN/ SAC Code on the tax invoices and Form GSTR-1 as penalty of INR 50,000/- (INR 25,000/- each for CGST and SGST) can be levied for non-mentioning or mentioning wrong HSN/ SAC Code under Section 125 of the Central Goods and Services Tax Act, 2017 (i.e., General penalty).

However, it is to be noted that there are many disputes w.r.t. classification of the various goods and services like sanitizers, railway parts, fryums etc. Further, the disputes are also going on as to whether classification as per Notification No. 1/2017- Central Tax (Rate) dated June 28, 2017 (“Goods Rate Notification”) should be in line with explanation (iii) and (iv) of said notification vide which it is provided that “Tariff item”, “sub-heading” “heading” and “Chapter” in the Goods Rate Notification shall mean tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (“CTA”) and  that rules for the interpretation of the First Schedule to the CTA including the Section and Chapter Notes and the General Explanatory Notes would be apply to the interpretation of the  Goods Rate Notification which provides only 1,208 goods approx. as against more than 12,000 products under First Schedule of the CTA.

To know more, kindly watch video on “Compulsorily mentioning of 4/6 Digit HSN/SAC Code -Goods/Services w.e.f April 1, 2021” by CA Bimal Jain- https://www.youtube.com/watch?v=TCQOgz3CyUk

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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