What is a HSN Code?

Import-export has always been the thriving center for any nation or business. Ever since international trade and commerce has gone global, the world has seen a different class of freight forwarding. There are millions of products being shipped from one place to another, making it clear that the language involved in transporting and shipping is the same all across the world irrespective of the nation. For this universal language to become transparent, specific codes are handed out, which makes communication easier regardless of international boundaries. Hence, HSN codes are an integral part of freight forwarding in the 21st century.

What is the HSN code?

HSN, or also known as the Harmonic System of Nomenclature, was invented by the World Customs Organization (WCO). It was brought into the bigger picture mainly, to classify goods from all over the world systematically and logically irrespective of nation or country. The code consists of six digits that segregate well over 5000 products based on various classifications, and these codes are used all around the world. These codes also help in identifying the product or cargo along with their location, and in implementing the required taxes based on its source. The HSN code makes it easy to know the shipment the product might be a part of. Each of the six-digit figures is classified into various sub-heading, and it is segregated based on the different terminology of the cargo that is being shipped.

Ever since its application, HSN has been a great hit with well over 200 countries adopting it and making things transparent for countries, shippers, or freight forwarders to track various details of a cargo. The implementation and adoption of the HSN code have reduced the complexity and difficulty of international trade. International trade and commerce have never been more straightforward.

Understanding HSN in India

Now that we have understood the brief meaning of HSN from a global point of view, HSN in India is relatively the same yet different in some aspects. India has been using the HSN system since 1986 under the Central Excise and Customs regime. The tax system of India, known as GST or Goods & Service Tax, covers all nomenclatures of transactions within the country. But the companies that use the HSN code need to follow a 3-tiered system of HSN. Most of the essential aspects of the code have been given below.

•    HSN is only for those companies that have a turnover of more than 1.5 crore rupees.
•    Companies that have a turnover of over five crore rupees will have to follow or use a 4-digit HSN code.
•    2-digit HSN code will be applicable for companies that have a turnover of more than 1.5 crore rupees and less than five crore rupees.  
•    An 8-digit HSN code will be mandatory for companies that are involved with the import and export.

Hence, it is safe to say that with HSN, the life of a freight forwarder using seaways for import-export has become more simple and straightforward. With the HSN code, everything has become transparent, and the experiences of any shipper have become relatively more comfortable.  

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