Summary

W.e.f. 01.04.2021 the requirement to mention the HSN codes on the Tax invoice has been amended and a registered person is required to mention the 4/6 digits of HSN codes basis their aggregate turnover. The number of digits that are required to be mentioned in the tax invoices are summarized below:

The aforesaid requirement is not applicable where the aggregate turnover of the registered person is less than INR 5 cr. and supply is made to unregistered person.

Analysis

Notification No. 12/2017 – CT dated 28.06.2017 was issued in pursuance to first proviso of Rule 46 and it provides for the number of digits of HSN Code of goods and services that are required to be mentioned on the tax invoice. The requirement of disclosing the number of digits of HSN Code was based on the “Aggregate turnover in the preceding Financial Year”.

In its 42^nd meeting, the GST Council, recommended the revised guidelines for declaring HSN for goods and SAC for services in the invoice and GSTR – 1 w.e.f. 01.04.2021. To quote:

1. HSN/SAC at 6 digits for supplies of both goods and services for taxpayers with aggregate annual turnover above 5 crores;
2. HSN/SAC at 4 digits for B2B supplies of both goods and services for taxpayers with aggregate annual turnover upto 5 crores;
3. Government to have power to notify 8-digit HSN on notified class of supplies by all

On the basis of the aforesaid recommendation made by the GST Council, Notification No. 78/2020

– CT dated 15.10.2020 was issued to amend Notification No. 12/2017 – CT. Vide the said amending notification a registered person is required to mention 4/6 digits on the tax invoice based on his aggregate turnover. Further, in the said notification it is provided that where the aggregate turnover in the preceding Financial year is up to 5 Cr. then the registered person issuing tax invoice is not required to mention the digits of HSN code, where the supply is made to the unregistered person. The said amending notification is made effective from 01.04.2021.

Further, NN 12/2017 is amended vide Notification No. 90/2020 – CT dated 01.12.2020. As per the said amending notification, a registered person, in the tax invoice, is required to mention 8 digits of HSN codes for the class of goods as specified in the notification. The class of goods that are notified are mainly different types of chemicals. Thus, in respect of specified chemical which are notified in Notification No. 90/2020 – CT, a registered person is required to mention 8 digits of HSN Code in the tax invoice. The said amendment was made effective from 01.12.2020.

Furthermore, vide Notification No. 82/2020 – Central Tax, instruction no 18 has been inserted in the instructions of FORM GSTR-1. Instruction No. 18 makes it mandatory to specify the HSN code of supply of goods and service that a class of registered persons shall be required to mention in accordance with the notification issued from time to time under proviso to rule 46 of the said rules. Thus, as per the said instruction 4/6 digit of HSN/ SAC code, as applicable, are required to be disclosed in table 12 [HSN wise summary of outward supply] of Form GSTR-1.

Penalty for failure to disclose correct HSN

Where a taxable person issues an incorrect invoice with wrong HSN/ improper HSN – contrary to the requirement of Rule 46, then penalty under Section 122 may get attracted. Thus, it is important to issue the invoice with utmost care and in accordance with the requirement as prescribed in the GST law.

Shuchi Agrawal

Shuchi is a qualified Chartered Accountant and a law graduate. Shuchi is having more than 6 years of experience in legal and tax advisory services across multiple sectors like real estate, infra, consumer business, etc. Currently, she is working as a Senior Manager in ALA Legal.