The World Customs Organization created the “Harmonized System of Nomenclature,” or HSN (WCO). The primary goal of the WCO’s introduction of HSN codes is to systematically classify all commodities. It dispels misunderstandings and promotes both local and international trade among the nations. HSN codes are used to transact over 20,000 commodities between nations worldwide.
The new HSN codes are used by WCO for more than 90% of global trade. India has become a part of the community by agreeing to use the HSN code process. It has over 5,000 commodity categories organized in a logical and legal structure, each denoted by a six-digit code. It is backed by precise guidelines for achieving consistent classification. HSN’s primary goal is to clearly and methodically classify products from all around the world. This promotes standard product classification and eases trade across countries.
Understanding of the HSN Code in Detail
There are 21 parts in the HSN framework, with 99 chapters, 1,244 headings, and 5,224 subheadings. Chapters separate each Section. Every chapter has headings inside it. There are subheadings under each heading. Headings and subheadings provide detailed product descriptions, whereas section and chapter names provide broad categories of goods.
HSN Global
More than 200 nations and economies utilize the HSN system for a variety of purposes, including uniform classification; based on customs tariffs; and gathering statistics on international trade; In terms of the HSN, more than 98% of the goods traded internationally are classified.
Most nations recognize a number for each commodity under the Harmonized System of Nomenclature. For nearly all products, the HSN number stays the same. However, depending on the type of items classified, the HSN number used in some of the countries differs slightly.
HSN Code India
Since 1971, India has been a part of the World Customs Organization (WCO). Originally, goods were classified for Customs and Central Excise using 6-digit HSN codes. To improve the codes’ precision, Customs and Central Excise later added two more digits, creating an eight-digit categorization.
HSN Code and GST
HSN codes are intended to make GST standardized and widely recognized. The requirement to upload a thorough description of the products will be eliminated with HSN codes. As GST returns are computerized, this will simplify filing and save time. If a dealer’s or service provider’s turnover is within the aforementioned slabs, they are required to include an HSN/SAC-wise summary of sales in their GSTR-1.
What Separates the HSN Section-wise Code from the Chapter-wise Code?
In order to understand the same lets discuss them separately:
HSN Chapter-Wise Code List
- Structure: Products are categorized into chapters by the chapter-wise code list, where a certain category of products is represented by each chapter. The HSN is divided into 99 chapters.
- Detail Level: In each segment, chapters offer a more detailed classification. A particular variety of products is included in each chapter, which is further separated into headings and subheadings for in-depth classification.
- Format: The chapter-wise list of HSN codes usually has levels of 2, 4, 6, and 8 digits. For example, the first two digits refers the chapter, and the next few digits offer a more thorough categorization.
- Purpose: This thorough classification helps to define the precise kind of products for trade policy, taxation, and statistical analysis, among other uses.
HSN Section-Wise Code List
- Structure: Chapters are divided into more comprehensive sections by the section-wise code list. The HSN is divided into 21 sections.
- Detail Level: Chapters are grouped at a higher level in sections. Numerous chapters that are connected by the kinds of products they cover are included in each part. For instance, chapters 50 through 63 are included under Section XI, which deals with textiles and textile goods.
- Format: Roman numbers (e.g., part I, Section II, etc.) are usually used to designate sections, and the titles of each part give a summary of the kinds of commodities that are contained in that section.
- Purpose: This more advanced classification is helpful for a more comprehensive study and comprehension of product categories. It facilitates HSN system navigation by putting related product kinds in one section.
Difference Between HSN Section-wise and Chapter-wise Code
Chapter-wise code list offers a thorough categorization necessary for specific identification and regulatory purposes, whereas the section-wise code list gives a general overview by combining similar chapters. Some of the key difference between HSN Section-wise Code and Chapter-wise Code are given below:
Granularity
- Chapters provide for more accurate classification of items because they are more particular and detailed
- Sections provide a higher-level overview because they are more comprehensive and cover several chapters.
Numbering
- Chapters are identified by two-digit codes (01 to 99).
- Sections are identified by Roman numerals (I to XXI).
Use Cases
- To provide the in-depth classification required for trade documents, taxes, and tariffs, chapters are utilized.
- High-level grouping and analysis of linked chapters are done using sections.
Conclusion
While HSN Chapter-wise codes offer detailed and specific categorization of products essential for precise classification in trade and taxation, HSN Section-wise codes provide a broader overview by grouping related chapters, facilitating easier navigation and comprehensive analysis within the HSN system. Both formats serve distinct purposes in ensuring efficient global trade and regulatory compliance.
FAQs
- What makes the HSN code significant?
For the global classification of commodities to be consistent, the HSN code is essential. It guarantees the correct application of customs and taxes, aids in the exact identification of goods, and simplifies international trade.
- What is the structure of the HSN code?
The HSN code is composed of six numbers. The chapter is represented by the first two digits, the heading by the next two, and the sub-heading by the final two.
- What does a chapter-wise HSN code mean?
The very first two digits of an HSN code refers to an HSN chapter-wise code. Every chapter covers a wide range of product categories. As an illustration, Chapter 01 deals with living animals, Chapter 02 with meat and edible offal, etc.
- What does a section-wise HSN code mean?
HSN section-wise codes are more comprehensive classifications that cover several chapters. Chapters 01 through 05, for example, deal with live animals and animal products, and are covered in Section I.
- How many chapters are there in the HSN classification?
There are 99 chapters in the HSN classification, each representing a specific category of goods.
- Where can I locate the full list of chapters and sections in HSN?
Usually, official trade publications, websites of customs and excise departments, or international trade associations like the World Customs Organization (WCO) include the entire list of HSN chapters and sections.
- How does the Goods and Services Tax (GST) use HSN codes?
HSN codes are used in the GST context to categorize items and ascertain the appropriate tax rate. On invoices and GST returns, businesses are required to provide the applicable HSN code.
- How can companies be certain they’re utilizing the right HSN code?
By using updated HSN code lists supplied by tax authorities, speaking with trade specialists or customs authorities, and reading official documents, businesses can make sure that HSN codes are used correctly.
