HSN Codes Reporting Requirements in GSTR-1/1A

The HSN codes play an important role in GST. Every goods or services have their own HSN Codes as specified in the custom tariff. For the classification of goods there are total 98 chapters in the first schedule of the custom tariff. Hence for determining the HSN code of goods/products we have to refer those chapters of custom tariff.  For the classification of services we have to refer the chapter 99. After determining the appropriate HSN code the taxpayers have to determine the rate of GST. For determining the GST rate for goods the Notification No. 01/2017 CT(R) have to be referred. Similarly, for determining the GST rate for goods the Notification No. 11/2017 CT(R) have to be referred. The HSN code & GST Rate which is mentioned on the tax invoices issued by the supplier have also to be reported in GSTR-1/1A. However, there are some changes in the said HSN reporting requirements in GSTR-1/1A from the tax period January 2025 onwards. In this article we will discuss about those changes and also discuss about some other provisions of GST law with respect to the HSN codes.

Requirement to mention HSN codes on tax invoice:
Under CGST Rules 2017, there is Rule 46 which prescribed the particulars that should have been mentioned on the tax invoice. The first proviso of said rule states that the Board may, on the recommendations of the Council, by notification, specify the number of digits of HSN code for goods or services that a class of registered persons shall be required to mention on the tax invoice.

Thus in pursuance of the first proviso to rule 46 of CGST Rules 2017 the Notification No. 12/2017 CT has been issued wherein it was stated that if the registered person having aggregate turnover in the preceding financial year is upto 5 crores then 4 digits HSN codes are required to be mentioned on the tax invoice. If aggregate turnover in the preceding financial year is more than 5 crores then 6 digits HSN codes are required to be mentioned on the tax invoice. Further, if aggregate turnover in the preceding financial year is upto 5 crores and supply is made to unregistered person (B2C supply) then registered person may not mention the required digits of HSN Code.  Also in the said notification the certain chemicals are notified for which the taxpayer is required to mention 8 digits HSN code.

Requirement to report HSN codes in GSTR-1/1A:
For mandatory mentioning of HSN codes in GSTR-1 an advisory has been issued on the common portal on 20.07.2022. Wherein it is was stated that the requirement to report 4 or 6 digits HSN code in table 12 of GSTR-1 would be implemented in the phased manner.  Phase 1 was implemented in  two parts. The Part I of Phase 1 was implemented from 1^st April 2022. As per Part I of Phase 1:
1. The taxpayers having annual aggregate turnover upto 5 crores:
(i) Required to mandatorily report 2 digits HSN code for goods & services in table 12 of GSTR-1.
(ii) Manual user entry is allowed for entering HSN or description
(iii) Warning or alert message shall be shown in case of incorrect HSN code.
(iv) However, the taxpayers will be able to file GSTR-1 after manual entry.  

2. The taxpayers having annual aggregate turnover more than 5 crores:
(i) Required to mandatorily report 4 digits HSN code for goods & services in table 12 of GSTR-1.
(ii) Manual user entry is allowed for entering HSN or description
(iii) Warning or alert message shall be shown in case of incorrect HSN code.
(iv) However, the taxpayers will be able to file GSTR-1 after manual entry.

From 1stAugust, 2022, the Part-II of Phase-1 was implemented. Which states that The taxpayers having annual aggregate turnover upto 5 crores are mandatory required to report 2 digits HSN codes and the taxpayers having  annual aggregate turnover more than 5 crores are mandatory required to report 6 digits HSN codes in table 12 of GSTR-1. Rest of the conditions regarding the manual entry was the same as mentioned above.

For implementing the Phase 2 an advisory was issued on the common portal on 22.10.2022 that from 1st November, 2022, Phase-2 would be implemented on GST Portal and the taxpayers having an annual aggregate turnover upto 5 crores would need to report 4 digits HSN codes in table 12 of GSTR-1 and the taxpayers having annual aggregate turnover more than 5 crores are mandatory required to report 6 digits HSN codes.

After successful implementation of Phase-I & Phase-II, an advisory has been issued on the portal on 09.01.2025 for implementation of Phase-III regarding Table 12 of GSTR-1 & 1A from return period January 2025. In Phase III, there is no change in the threshold limit of turnover to report the required digits of HSN codes. However, in the Phase III the conditions for report the HSN codes are changed like:
(i) Manual user entry of HSN will not be allowed.
(ii) HSN code can be selected from drop down only.
(iii) A customized description mentioned in HSN master will auto-populate in a new filed called "Description as per HSN Code".

Changes in table -12 of GSTR-1 from the return period January 2025:

1. Validation of data:
In Table-12 validation with regard to value of the supplies have also been introduced. These updates aim to streamline compliance and ensure accurate reporting. Wherein the value of B2B supplies shown in different tables of GSTR-1 would be validated with the B2B supplies shown in table -12 of GSTR-1. Similarly, the value of B2C supplies shown in different tables of GSTR-1 would be validated with the value of B2C supplies shown in Table-12. In case of amendments, only the differential value will be taken for the purpose of validation.

Initially these validations have been kept in warning mode only, which means the warning or alert message shall be shown in case of mismatch in values, whereas taxpayers will be able to file GSTR-1 in such cases. Further, in case B2B supplies are reported in other tables of GSTR-1, in that case B2B tab of Table-12 cannot be left empty.

2. Bifurcation of table-12 of GSTR-1/1A:
Now the table 12 of GSTR-1/1A is bifurcated into two tabs i.e., B2B Supplies & B2C Supplies. In the tab of B2B supplies the HSN summary of B2B supplies would be reported. Similarly, in the tab of B2C the HSN summary of B2C supplies would be reported.

3. Option to Download HSN Code List:
A new button has been introduced in Table 12, "Download HSN Codes List". Upon clicking of this button, taxpayer would be able to download an excel file with the updated list of HSN & SAC codes for goods and services along with their description.

4. The button for Product Name as in My Master:
Taxpayer can search the description provided by them in My HSN Master and upon selection of the same, the HSN code, Description as per HSN Code, UQC & Quantity shall be auto-populated. This is an optional functionality.

Conclusion: From the return period January 2025 onwards, taxpayers must report HSN codes in Table 12 of GSTR-1/1A. The Taxpayers having an annual aggregate turnover (AATO) up to Rs.5 crore must report 4-digit HSN codes, while those who have AATO exceeding Rs. 5 crore must report 6-digit HSN codes. Now, the manual HSN entry would not be allowed. HSN codes would be selected from the dropdown. Table 12 is now bifurcated into B2B Supplies and B2C Supplies tabs and a new button enables taxpayers to download an updated list of HSN and SAC codes. Taxpayers can search product descriptions stored in their HSN Master and upon selection, HSN codes, descriptions, UQC, and quantity will auto-populate.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.