HSN code
No Comments
Subject: IR/Economy
Context:
HSN code is in news over debate over GST rate for roti and Parotta.
Concept:
- HSN is a six-digit code that classifies more than 5000 products, arranged in a legal and logical structure. To achieve uniform classification, the HSN is supported by well-defined rules and is accepted worldwide.
- HSN classification is widely used for taxation purposes by helping to identify the rate of tax applicable to a specific product in a country that is under review. It can also be used in calculations that involve claiming benefits.
- It also applies to import and exports. The HSN code aids in determining the quantity of all items imported or traded through a nation.
Importance:
- While the primary purpose of the HSN code is the systematic classification of goods, it can also be used to gather data and solve problems that would otherwise be difficult to obtain. The result is a more efficient international trade system.
- HSN is in use worldwide, with 200+ countries participating. This impressive adoption rate can be chalked up to the benefits of HSN, which include:
- Collection of international trade statistics
- Provision of a rational basis for Customs tariffs
- Uniform classification
HSN Codes for GST in India:
- HSN will be applicable in India after implementation of GST. India has already been using HSN system in the Central Excise and Customs regime.
- It is a much more detailed classification that added another two digits to the 6-digit structure. There is a requirement to mention HSN code of items in tax invoice under GST.