HSN Code

HSN Code stands for Harmonized System of Nomenclature Code.

It is an internationally standardised numerical code used to classify traded products. In India, HSN codes are used under the GST system to identify the applicable GST rate for a product or service. The HSN code determines how goods are categorised for tax purposes and is mandatory on all GST invoices above a certain turnover threshold. What is an HSN Code? The HSN system was developed by the World Customs Organization (WCO) and is used by more than 200 countries as the basis for customs tariffs and trade statistics. The HSN code for a product ranges from 2 digits (chapter) to 6 digits (heading and sub-heading) internationally. India has extended the HSN code to 8 digits for domestic trade — the first 6 are international, and the last 2 are India's national subdivisions. For example, the HSN code 0901 11 covers "Coffee, not roasted: Not decaffeinated." The 8-digit Indian version 0901 11 10 covers "Arabica plantation coffee." The GST rate for coffee is 5%, which applies regardless of whether it is imported or domestically produced — the classification determines the rate. Under GST rules in India, businesses must mention HSN codes on invoices based on their annual turnover. Businesses with turnover up to ₹5 crores must use 4-digit HSN codes. Businesses with turnover above ₹5 crores must use 6-digit HSN codes. Export businesses must use 8-digit HSN codes that match the destination country's requirements. The level of HSN detail required increases with the size of the business. HSN codes are organised in 99 chapters covering all physical goods. For instance: Chapter 1-5 covers animals and animal products; Chapter 6-14 covers live trees and plant products; Chapter 15-24 covers oils, fats, food products, and beverages; Chapter 84-85 covers machinery and mechanical appliances, electrical equipment, and computers; Chapter 87 covers vehicles (including automobiles). Services are classified separately under the Services Accounting Code (SAC). Using the correct HSN code is essential for two reasons. First, the wrong HSN code means the wrong GST rate is applied — either too much tax (overcharging the customer) or too little (creating a tax liability risk). Second, HSN codes are used by the GST portal to populate statistics on trade by commodity, and incorrect codes create data quality issues in the GST analytics system. The CBIC publishes the GST rate schedule based on HSN classification, which is updated with each GST Council meeting.