# What is HSN Code?
The HSN code means “Harmonic System of Nomenclature” and it was implemented in 1988 by the WCO (World Customs Organization). This system has been introduced for the systematic classification of goods all over the world. The main purpose of the WCO to implement the HSN code is to classify all goods sequentially. This eliminates confusion and helps in domestic and international trade between countries. India joined the community by accepting the HSNcode process.
# What is SAC?
The Service Accounting Code (SAC) is a unique code that is similar to the International HSNcode in many ways. The SAC is issued by a central indirect tax to classify each service so that the applicable rate of tax on the related services can be easily identified. SAC is used when creating invoices for any of services.
# Understanding the HSN Code
The HSNcode includes 21sections, 99 chapters, 1244 titles, 5224 Subdivisions.
There are about 21 groups in each section in the HSNcode, all divided into 99 chapters. After that, all the chapters are divided into headings which are about 1244 in number. All the titles are then divided into 5224 subdivisions. In the code, it operates in the following way: All chapters are designated as two-digit HSN numbers, then two-digit HSN numbers are subclassified into four-digit HSN codes. Such digits are HSN codes. Sub-classified into a six-digit HSN-code. Note; To subclass the six-digit HSN number in some countries, an additional two-digit HSNcode must be created to create an eight-digit HSNcode.
# Importance of the HSN Code
The primary purpose of the HSN is a systematic classification of goods, it can also be used to gather all the data and solve whatever problems are there. The result of which is a more efficient national & international trade system. HSN is being used all over the world.
# HSN in India
India has been a member of the World Customs Organization (WCO) since 1971. The HSNcode was originally used to classify goods for customs and central excise. Later Customs and Central Excise added two more digits to make the code more accurate, resulting in an 8-digit classification in HSN. India is ready for all its Goods and Services Tax or GST, which is equally applicable to all goods and services. This will reduce the burden on the consumer by reducing many indirect taxes. India has been using the HSN system since 1986 under Central Excise and Customs. This is the more elaborate classification that has added one and two digits to the 6 digit structure.
Classification of code:
First two digits represent the chapter number for particular product
Next two digits represent the heading number for the product.
Finally, last two digits is the product code
Under GST: (Current Rule)
People with a turnover of less than INR 1.5 crore are not required to follow HSN,
Those with more than INR 1.5 Crore and less than INR 5 Crore will have to use 2 digit HSN code,
People with more than INR 5 crore turnover will have to use the 4-digit HSNcode. Importing or exporting dealers must comply with the 8-digit HSNcode.
Under GST: (New Rule) Amendment will effect from 1st April,2021
People with a turnover upto 5 crore are required to use 4-digit HSNcode,
People with more than INR 5 crore turnover will have to use the 6-digit HSNcode
# HSN in Worldwide
This impressive adoption rate can be carried over to the benefits of HSN, including – Collection of international trade data, provision of a rational basis for customs duty, classification of uniforms, classified about 98% of HSN international trade stock. The HSN number is present for every item in every country, and the number is the same for almost all items. In some countries, this HSN number may vary slightly as they are entirely based on the nature of the items classified.
# How does HSN Code Work?
The HSN is a 6-digit uniform code, which uses 5000+ products carefully and is widely used by 200+ countries. The HSN classification is widely used for taxation purposes, which helps identify the tax rate applicable to a specific product in a country. It can also be used in calculations that also include claiming benefits. This also applies to both imports and exports. The HSNcode helps determine the quantity of all goods that are imported or traded through a country.
It is very important to mention the correct HSN/ SAC Code on the tax invoices and Form GSTR-1 else penalty of Rs. 50,000/- (Rs. 25,000/- each for CGST and SGST) can be levied for non-mentioning or mentioning wrong HSN/ SAC Code under Section 125 of the Central Goods and Services Tax Act, 2017
# How can you Manage Inventory with HSN Code in Vyapar?
How to add the items HSNcode in Vyapar?
Step 1. Go to the left Menu > Settings
Step 2. TAXES & GST > “Enable HSN/SAC code” option
Step 3. Now Go to the left Menu > Items > Add Items
Step 4. Add HSN code here for that particular item
(If you want to search item HSN code then you can click the search bar)
If you have already created the item then go to the items in the left menu, click on the three dots in front of that particular item and click on the edit option and add HSNcode, or double click on the item name and add HSNcode.
How to Get HSN code while doing sales & purchases & HSNcode on invoice print?
Step 1. Go to the left Menu > Settings
Step 2. Print > Scroll down and click on “Item Table Customization” option
Step 3. Enable “HSN/SAC code” option > Click on “Done” button
Step 4. Go to the Top right corner at home page > +Add Sale/ +Add Purchase > Click on “+” sign at the end of the item line > Enable HSN/SAC code option > Then Item HSN code will be appear near the item name column at the time of “SALE/PURCHASES”
Step 5. Overview of invoice with HSNcode
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