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HSN Code Mandatory on Tax Invoice from 1st April 2021
Dear reader, with effect from the 1st day of April 2021, HSN Code will be mandatory on GST Invoice. Now, we need to mention HSN or SAC Code corresponding to each item in the tax invoice.
The Central Board of Indirect Taxes and Customs (CBIC) through notification no. – 78/2020-Central Tax dated 15.10.2020 has mandated the HSN code on tax invoice effective from 1 April 2021.
If your previous year’s annual turnover is less thanRs. 5 crores, you will have to mention a 4-digit HSN Code and if it is more than Rs. 5 crores, you will have to mention a 6-digit HSN Code on the tax invoice.
4 Digit HSN Code Vs. 6 Digit HSN Code
The 4-digit HSN code will be mandatory for B2B, SEZ, Export, or Deemed Export tax invoices and optional for B2C tax invoices if your business’s aggregate turnover in the preceding financial year was up to rupees five crores (₹5 crores).
And, 6-digit HSN Code will be mandatory if your business’s aggregate turnover in the preceding financial year was more than rupees five crores. The 6-digit HSN code is mandatory for all tax invoices.
What is HSN Code?
HSN code (Harmonised System of Nomenclature) is a six-digit code that classifies more than 5000 products according to well-established rules that are accepted worldwide. This code has been developed by the World Customs Organisation (WCO) to enable efficient international trade.
Penalty for wrong or non-mentioning of HSN Code
Dear taxpayers, please take a note that there is a provision of penalty for non-compliance with this requirement. Therefore, It is very important to mention the correct HSN/ SAC Code on the tax invoice otherwise penalty of Rs. 50,000/- (Rs. 25,000/- each for CGST and SGST) can be levied for non-mentioning or mentioning the wrong HSN/ SAC Code under Section 125 of the Central Goods and Services Tax Act, 2017 (i.e., General penalty).