HSN Codes
Guide to Harmonized System Nomenclature
Introduction
HSN codes, or Harmonized System Nomenclature codes, are a multi-purpose international product classification system. In simpler terms, they are used to classify goods for taxation purposes. These codes were developed with the goal of facilitating international trade, simplifying taxation processes, and increasing transparency, and have been implemented globally since 1988.
Want to know more about how they work? Keep reading!
What are HSN Codes?
HSN stands for ‘Harmonized System Nomenclature.’ The Nomenclature contains six digits code allotted certain group of products. These HSN Codes are a unique identification system for products based on their characteristics like composition, shape, and size.
HSN code acts as a universal classification system that helps facilitate trade by providing a common language for the identification of products by importers, exporters, customs and otehr tax authorities.
Spread and evolution?
The HSN code is implemented by over 200 countries It is revised every five years. For instance, the current version was revised w.e.f. 1 January 2022, and the next is expected to come up from 1 January 2027. . The evolution of the HSN codes has enabled global cooperation in trade and has helped eliminate trade barriers.
How are HSN Codes used?
Governments use HSN Codes to identify groups of goods to levy and collect taxes. This is advantageous for both the tax authorities and global businesses, as it helps to eliminate errors and disputes in understanding the goods under tax compliance.
Customs officials use HSN Codes to inspect and regulate imports and exports. These codes provide a standardized language for tracking shipments, making it easier for customs officials to identify the contents of a shipment and whether it complies with regulations. This results in faster clearance times and reduced costs.
Benefits of HSN Code: HSN Codes make it easier to classify goods, automate taxation processes, increase transparency and reduce risks of errors and disputes.
- HSN Codes help in facilitating international trade by providing a unified platform for classification. Secondly, HSN codes Simplify taxation processes by enabling automatic calculation of GST (Goods and Services Tax). This results in fewer errors and disputes, thereby reducing unnecessary expenses.
- HSN Codes increases transparency in trade transactions and makes it easier for customs officials to monitor cross-border movements. It is now mandatory to mention the HSN codes on all invoices for tax returns.
How to Find HSN Codes?
The last thing you want as a business owner is to pay the wrong taxes for your products, right? That’s where understanding the right HSN code come into play.
One way is to utilize HSN code search engines online. A quick search shows plenty of options available, making it easy to find the code you need. However, the authenticity of the result needs to be confirmed. This may not be the most appropriate one as the subjectivity is required to be analysed extensively and holistically. Another option is to consult with customs officials to ensure you’re getting the right code for your product. Many countries provide advance rulings for future classification and applicable import duties.
The better option is to get in touch with consultants who have developed expertise in advising classification based on reasonable justifications.
You can also get in touch with us today with your HSN query on office@optitaxs.com
We provide consultancy for optimum tax incidence compliance in trade of goods and services.