6 digit HSN code or 4 digit HSN code

HS Code is an internationally accepted format of coding to describe a product. All around the world same HS codes are used to describe a product.

Till now we were using 4 digit HS code in tax invoices, however the rule is changing from April 1, 2021.

Now Tax Payers who have a turnover of more than 5 crores have to mention 6 digit HSN code in the invoice. For Taxpayers, with less than 5 crore turnover 4 digit HSN code will be applicable.

HS code is a very important part of a tax invoice. Government not only keep track of outward and inward materials through HS code but also at the national level can arrive at production and consumption of products.

Further, GST tax rates are based on HS codes and help to calculate tax liability at the server level and avoid any unwanted litigations.

It is therefor advised to update accounting systems with 6 digit HS code, otherwise one may face legal issues.